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EXHIBIT 10.6
Lease and Security Agreement
by and between
Nationwide Health Properties, Inc.,
a Maryland corporation,
as "Landlord"
and
American Retirement Communities, L.P.,
a Tennessee limited partnership
as "Tenant"
Dated January 2, 1997
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TABLE OF CONTENTS
Page
1. Term............................................................... 2
1.1 Term............................................... 2
1.2 Renewal Terms...................................... 2
2. Rent............................................................... 3
2.1 Initial Term Minimum Rent.......................... 3
2.2 Renewal Term Minimum Rent.......................... 3
2.3 Initial Term Additional Rent....................... 6
2.4 Renewal Term Additional Rent....................... 7
2.5 Total Rent......................................... 7
2.6 Proration for Partial Periods...................... 9
2.7 Absolute Net Lease................................. 9
3. Taxes, Assessments and Other Charges............................... 10
3.1 Tenant's Obligations............................... 10
3.2 Proration.......................................... 10
3.3 Right to Protest................................... 10
3.4 Tax Bills.......................................... 10
3.5 Other Charges...................................... 11
4. Insurance.......................................................... 11
4.1 General Insurance Requirements..................... 11
4.2 Fire and Other Casualty............................ 12
4.3 Public Liability................................... 13
4.4 Professional Liability Insurance................... 13
4.5 Workers Compensation............................... 14
4.6 Boiler Insurance................................... 14
4.7 Business Interruption Insurance.................... 14
4.8 Deductible Amounts................................. 14
5. Use, Maintenance and Alteration of the Premises.................... 14
5.1 Tenant's Maintenance Obligations................... 14
5.2 Regulatory Compliance.............................. 16
5.3 Permitted Use...................................... 18
5.4 Tenant Repurchase Obligation....................... 18
5.5 No Liens; Permitted Contests....................... 19
5.6 Alterations by Tenant.............................. 20
5.7 Capital Improvements Funded by Landlord............ 21
5.8 Compliance With IRS Guidelines..................... 21
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6. Condition And Title Of Premises; Right of First Offer.............. 22
6.1 Condition and Title of Premises.................... 22
6.2 Right of First Offer to Purchase Premises.......... 22
7. Landlord and Tenant Personal Property.............................. 27
7.1 Tenant Personal Property........................... 27
7.2 Landlord's Security Interest....................... 28
7.3 Financing Statements............................... 29
7.4 Intangible Property................................ 29
8. Representations And Warranties..................................... 30
8.1 Due Authorization And Execution.................... 30
8.2 Due Organization................................... 30
8.3 No Breach of Other Agreements...................... 31
9. Financial, Management and Regulatory Reports....................... 31
9.1 Monthly Facility Reports........................... 31
9.2 Quarterly Financial Statements..................... 31
9.3 Annual Financial Statement......................... 31
9.4 Accounting Principles.............................. 32
9.5 Regulatory Reports................................. 32
10. Events of Default and Landlord's Remedies.......................... 33
10.1 Events of Default.................................. 33
10.2 Remedies........................................... 36
10.3 Receivership....................................... 41
10.4 Late Charges....................................... 42
10.5 Remedies Cumulative; No Waiver..................... 43
10.6 Performance of Tenant's Obligations by Landlord.... 43
11. Security Deposit................................................... 44
12. Damage by Fire or Other Casualty................................... 44
12.1 Reconstruction Using Insurance..................... 44
12.2 Surplus Proceeds................................... 44
12.3 No Rent Abatement.................................. 45
12.4 End of Term........................................ 45
13. Condemnation....................................................... 45
13.1 Complete Taking.................................... 45
13.2 Partial Taking..................................... 46
13.3 Lease Remains in Effect............................ 46
14. Provisions on Termination of Term.................................. 46
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14.1 Surrender of Possession............................ 46
14.2 Removal of Personal Property....................... 47
14.3 Title to Personal Property Not Removed............. 47
14.4 Management of Premises............................. 47
14.5 Correction of Deficiencies......................... 48
15. Notices and Demands................................................ 48
16. Right of Entry; Examination of Records............................. 49
17. Landlord May Grant Liens........................................... 50
18. Quiet Enjoyment.................................................... 50
19. Applicable Law..................................................... 51
20. Preservation of Gross Revenues..................................... 51
21. Hazardous Materials................................................ 52
21.1 Hazardous Material Covenants....................... 52
21.2 Tenant Notices to Landlord......................... 53
21.3 Extension of Term.................................. 53
21.4 Participation in Hazardous Materials Claims........ 54
21.5 Environmental Activities........................... 54
21.6 Hazardous Materials................................ 54
21.7 Hazardous Materials Claims......................... 55
21.8 Hazardous Materials Laws........................... 55
22. Assignment and Subletting.......................................... 56
23. Indemnification.................................................... 58
24. Holding Over....................................................... 58
25. Estoppel Certificates.............................................. 59
26. Conveyance by Landlord............................................. 59
27. Waiver of Jury Trial............................................... 59
28. Attorneys' Fees.................................................... 60
29. Severability....................................................... 60
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30. Counterparts....................................................... 60
31. Binding Effect..................................................... 60
32. Waiver and Subrogation............................................. 60
33. Memorandum of Lease................................................ 60
34. Incorporation of Recitals and Attachments.......................... 61
35. Titles and Headings................................................ 61
36. Nature of Relationship; Usury Savings Clause....................... 61
37. Joint and Several.................................................. 61
38. Survival of Representations, Warranties and Covenants.............. 62
39. Interpretation..................................................... 62
EXHIBITS
EXHIBIT A - LEGAL DESCRIPTION OF PREMISES
EXHIBIT B - LANDLORD PERSONAL PROPERTY
EXHIBIT C - APPRAISAL PROCESS
EXHIBIT D - PERMITTED EXCEPTIONS
EXHIBIT E - INITIAL TERM MINIMUM RENT
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LEASE AND SECURITY AGREEMENT
THIS LEASE AND SECURITY AGREEMENT ("LEASE") is made and entered into as of
the 2nd day of January, 1997 by and between Nationwide Health Properties, Inc.,
a Maryland corporation ("LANDLORD") and American Retirement Communities, L.P., a
Tennessee limited partnership ("TENANT").
W I T N E S S E T H:
WHEREAS, Landlord is the owner of that certain real property, all
improvements thereon and all appurtenances thereto, presently permitted for one
hundred eighty (180) living units (currently operated as seventeen (17) assisted
living facility beds and one hundred sixty-one (161) independent living facility
beds), known as "Holley Court Terrace", located at 1111 Ontario Street, Oak
Park, Illinois 60302, and more specifically described in Exhibit "A" attached
hereto, together with certain of the furniture, machinery, equipment,
appliances, fixtures, supplies and other personal property used in connection
therewith as more specifically described on Exhibit "B" attached hereto
("LANDLORD PERSONAL PROPERTY"). The foregoing real and personal property owned
by Landlord as described in this Recital shall be collectively referred to in
this Lease as the "PREMISES"); and
WHEREAS, any reference in this Lease to the "RETIREMENT CARE FACILITIES"
shall mean the care facilities on the Premises as described above; and
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WHEREAS, Landlord desires to lease the Premises to Tenant, and Tenant
desires to lease the Premises from Landlord.
NOW THEREFORE, in consideration of the mutual covenants, conditions and
agreements set forth herein, Landlord hereby leases and lets unto Tenant the
Premises for the term and upon the conditions and provisions hereinafter set
forth.
1. TERM.
1.1 TERM. The term of this Lease shall commence on January 2, 1997 and
shall end on December 31, 2006 (the "INITIAL TERM") unless extended pursuant to
Section 1.2 or earlier terminated in accordance with the provisions hereof. The
Initial Term and all Renewal Terms are referred to collectively as the "TERM".
1.2 RENEWAL TERMS. The Term may be extended for three (3) separate renewal
terms (each a "RENEWAL TERM") of ten (10) years each, upon the satisfaction of
all of the following terms and conditions:
1.2.1 Not more than ten (10) business days before or after the date
which is fifteen (15) months prior to the end of the then current Term,
Tenant shall give Landlord written notice that Tenant desires to exercise
its right to extend the then current Term for one (1) Renewal Term.
1.2.2 There shall be no Event of Default (as defined in Section 10
below) under this Lease, either on the date of Tenant's notice to Landlord
pursuant to Section 1.2.1 above, or on the last day of the then current
Term.
1.2.3 Trinity Towers Limited Partnership, a Tennessee limited
partnership ("NH TENANT"), concurrently exercises its right to extend the
then
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current term of that certain Lease and Security Agreement of even date
herewith, by and between NH Texas Properties Limited Partnership, a Texas
limited partnership ("NH TEXAS PROPERTIES LIMITED PARTNERSHIP"), and NH
Tenant (the "NH AGREEMENT") and the terms and conditions of renewal of the
NH Agreement are fully satisfied.
1.2.4 The amount of the letter of credit posted by Tenant pursuant to
Section 11 of this Lease shall be increased for the remainder of the Term
to Five Hundred Nine Thousand Two Hundred Fifty-Nine and 26/100 Dollars
($509,259.26) concurrently with the commencement of the first Renewal Term.
1.2.5 All other provisions of this Lease shall remain in full force
and effect and shall continuously apply throughout the Renewal Term(s).
2. RENT. During the Initial Term and all Renewal Terms, minimum rent
("MINIMUM RENT") and additional rent ("ADDITIONAL RENT") shall accrue and/or be
paid by Tenant to Landlord as follows:
2.1 INITIAL TERM MINIMUM RENT. During the Initial Term, the Minimum Rent
shall be paid to Landlord by Tenant monthly in advance. Tenant shall pay to
Landlord Minimum Rent according to the schedule on Exhibit "E" attached hereto,
payable in advance on the first business day of each calendar month. Such
monthly amount is referred to herein as the "INITIAL TERM MINIMUM RENT."
2.2 RENEWAL TERM MINIMUM RENT. The Minimum Rent for each Renewal Term shall
be expressed as an annual amount but shall be payable in advance in equal
monthly
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installments on the first business day of each calendar month. Such
annual Minimum Rent shall be equal to the product of:
2.2.1 the lesser of (i) the Adjusted Fair Market Value of the Premises
(as such term is defined in Section 2.2.4 below) on the date of Tenant's
notice of exercise pursuant to Section 1.2.1 or (ii) Landlord's Adjusted
Investment in the Premises (as defined in Section 2.2.5 below); and
2.2.2 a percentage equal to three hundred (300) basis points over the
twenty (20) day average 10 year United States Treasury rate in effect on
the date of Tenant's notice of exercise pursuant to Section 1.2.1.
2.2.3 Notwithstanding the foregoing, in no event shall the Minimum
Rent for the first Renewal Term exceed one hundred twenty-eight and
one-eighth percent (128.125%) of the Total Rent (as such term is defined in
Section 2.3.1 below) payable during calendar year 2005, and in no event
shall the Minimum Rent for any Renewal Term other than the first Renewal
Term exceed one hundred twenty-five percent (125%) of the Total Rent in
effect for the Lease Year immediately preceding the first Lease Year of
such Renewal Term. Furthermore, in no event shall the Minimum Rent for the
first Lease Year of the first Renewal Term be less than one hundred two and
one-half percent (102.5%) of the Total Rent payable during calendar year
2005.
2.2.4 As used herein, the "ADJUSTED FAIR MARKET VALUE" of the Premises
shall mean fair market value as determined under this Lease with the
following adjustments: (i) excluding the enterprise value of any home
health
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agency operated by Tenant out of space in the Premises but including the
fair rental value of such space; and (ii) minus the value of any capital
improvements to the Premises paid for by Tenant and not funded by Landlord
under Section 5.7 below.
2.2.5 As used herein, "LANDLORD'S ADJUSTED INVESTMENT" in the Premises
shall mean Landlord's Original Investment (as hereinafter defined in this
Section 2.2.5) multiplied at the end of each Lease Year by a percentage
equal to one hundred percent (100%) plus one-half (1/2) of the CPI Increase
(as defined in Section 2.2.6 below) for such Lease Year. As used herein,
"LANDLORD'S ORIGINAL INVESTMENT" shall mean (A) Eleven Million Dollars
($11,000,000), as increased by (B) any amount paid by Landlord pursuant to
Section 5.7 below, and as decreased by (C) any net award paid to Landlord
pursuant to Section 13.2 below, all as applicable.
2.2.6 As used herein, "CPI" shall be defined as the Consumer Price
Index for All Urban Wage Earners and Clerical Workers, United States
Average, Subgroup "All Items" (1982-1984=100), as published by the United
States Department of Labor, Bureau of Labor Statistics. The "CPI INCREASE"
shall be calculated annually by comparing the CPI in effect on the first
calendar day of the immediately preceding Lease Year to the first calendar
day of the then current Lease Year.
If within ten (10) days of the date of Tenant's notice of exercise pursuant to
Section 1.2.1, Landlord and Tenant are unable to agree on the Adjusted Fair
Market Value of the Premises
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for purposes of this calculation, such Adjusted Fair Market Value shall be
established by the appraisal process described on Exhibit "C" attached hereto.
The Minimum Rent for the applicable Renewal Term must be finally determined by
such appraisal process on or before a date ninety (90) days after Tenant's
notice of exercise pursuant to Section 1.2.1 or Tenant shall lose its right to
extend the Term. Landlord and Tenant acknowledge and agree that this Section is
designed to establish a fair market Minimum Rent for the Premises during the
applicable Renewal Terms.
2.3 INITIAL TERM ADDITIONAL RENT.
2.3.1 Commencing with the second Lease Year of the Initial Term and
continuing thereafter during the Initial Term, Tenant agrees to pay
Additional Rent to Landlord on a monthly basis in arrears on the first
business day of each calendar month. Such Additional Rent shall be equal to
(a) twenty percent (20%) of the amount by which the Gross Revenues for the
Lease Year through the applicable month exceed the prorated Gross Revenues
for the applicable portion of the Base Year, minus (b) all Additional Rent
theretofore paid by Tenant during such Lease Year.
2.3.2 "GROSS REVENUES" shall be calculated according to GAAP and shall
be defined as all revenues generated by the operation, sublease and/or use
of the Premises in any way, excluding (i) contractual allowances during the
Term for billings not paid by or received from the appropriate governmental
agencies or third party providers; (ii) all proper patient billing credits
and adjustments according to GAAP relating to health care accounting; and
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(iii) federal, state or local sales or excise taxes and any tax based upon
or measured by said revenues which is added to or made a part of the amount
billed to the patient or other recipient of such services or goods, whether
included in the billing or stated separately.
2.3.3 "LEASE YEAR" shall be defined as the twelve (12) month periods
commencing on January 1 of each year of the Term.
2.3.4 The "BASE YEAR" during the Initial Term shall mean the year
ending on December 31, 1997.
2.4 RENEWAL TERM ADDITIONAL RENT. Except during the first Lease Year of any
Renewal Term, Tenant shall pay to Landlord Additional Rent in each Renewal Term
on a monthly basis in arrears no more than 30 days after the end of each month
during the applicable Lease Year. The Additional Rent for each Renewal Term
shall be calculated as provided in Section 2.3 except that the Base Year for the
purpose of determining such Additional Rent shall be the first Lease Year of the
applicable Renewal Term.
2.5 TOTAL RENT.
2.5.1 For all purposes of calculating and paying Minimum Rent and
Additional Rent under this Lease, the total of the Minimum Rent and
Additional Rent ("TOTAL RENT") payable by Tenant in any Lease Year will not
be less than the Total Rent paid by Tenant for the previous Lease Year.
2.5.2 Notwithstanding any of the other terms of this Section 2 but
subject to Section 2.5.3 below, the Total Rent due during each Lease Year
shall not increase from one Lease Year to the next by an amount in excess
of (i) two
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and one-half percent (2.5%), multiplied by (ii) the Total Rent due during
the immediately preceding Lease Year.
2.5.3 The terms of Section 2.5.2 above shall have no applicability in
determining the calculation of the Minimum Rent due during the first Lease
Year of any Renewal Term.
2.5.4 Within sixty (60) days of the end of each Lease Year, Tenant
shall deliver to Landlord a report in a form mutually agreed upon by
Landlord and Tenant, certified by an officer or general partner of Tenant,
as applicable, setting forth the calculations required by the application
of this Section 2.5. If said report provides that Tenant owes Landlord any
sum of money, Tenant shall accompany such report delivered to Landlord with
such funds. If said report provides that Landlord owes Tenant any sum of
money, such sum shall be applied as a credit against future installments of
Minimum Rent and Additional Rent due from Tenant to Landlord; provided,
however, if such sum is owed by Landlord to Tenant with respect to the last
Lease Year of the Term, Landlord shall pay such sum to Tenant within thirty
(30) days of Landlord's receipt of the report in question.
2.5.5 For the purpose of comparing the Total Rent from Lease Year to
Lease Year pursuant to this Section 2.5, the increase in Minimum Rent by
reason of any disbursement by Landlord pursuant to Section 5.7 of the Lease
shall be treated as follows: (i) for the purpose of comparing the Total
Rent in the Lease Year in which such disbursement is made against the Total
Rent in
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the preceding Lease Year, such increase in Minimum Rent shall be ignored,
and (ii) for the purpose of comparing the Total Rent in the Lease Year in
which such disbursement is made to the Total Rent in the following Lease
Year, such increase in Minimum Rent shall be deemed effective on the first
day of the Lease Year in which the disbursement is made.
2.6 PRORATION FOR PARTIAL PERIODS. The rent for any month during the Term
which begins or ends on other than the first or last calendar day of a calendar
month shall be prorated based on actual days elapsed.
2.7 ABSOLUTE NET LEASE. All rent payments shall be absolutely net to the
Landlord free of taxes (other than federal or state income taxes calculated on
the net income of Landlord), assessments, utility charges, operating expenses,
refurnishings, insurance premiums or any other charge or expense in connection
with the Premises. All expenses and charges, whether for upkeep, maintenance,
repair, refurnishing, refurbishing, restoration, replacement, insurance
premiums, real estate or other property taxes, utilities, and other operating or
other charges of a like nature or otherwise, shall be paid by Tenant. This
provision is not in derogation of the specific provisions of this Lease, but in
expansion thereof and as an indication of the general intention of the parties
hereto. Tenant shall continue to perform its obligations under this Lease even
if Tenant claims that Tenant has been damaged by any act or omission of
Landlord. Therefore, Tenant shall at all times remain obligated under this Lease
without any right of set-off, counterclaim, abatement, deduction, reduction or
defense of any kind. Tenant's sole right to recover damages against Landlord by
reason of a
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breach or alleged breach of Landlord's obligations under this Lease shall be to
prove such damages in a separate action against Landlord.
3. TAXES, ASSESSMENTS AND OTHER CHARGES:
3.1 TENANT'S OBLIGATIONS. Tenant agrees to pay and discharge (including the
filing of all required returns) any and all taxes (including but not limited to
real estate and personal property taxes, business and occupational license
taxes, ad valorem sales, use, single business, gross receipts, transaction
privilege, franchise rent or other excise taxes, but excluding federal or state
income taxes calculated on the net income of Landlord, and other assessments
levied, assessed, or payable against the Premises or any interest therein during
the Term, prior to delinquency or imposition of any fine, penalty, interest or
other cost.
3.2 PRORATION. At the end of the Term, all such taxes and assessments under
Section 3.1 shall be prorated.
3.3 RIGHT TO PROTEST. Landlord and/or Tenant shall have the right, but not
the obligation, to protest the amount or payment of any real or personal
property taxes or assessments levied against the Premises; provided that in the
event of any protest by Tenant, Landlord shall not incur any expense because of
any such protest, Tenant shall diligently and continuously prosecute any such
protest and notwithstanding such protest Tenant shall pay any tax, assessment or
other charge before the imposition of any penalty or interest.
3.4 TAX BILLS. Landlord shall promptly forward to Tenant copies of all tax
bills and payment receipts relating to the Premises received by Landlord.
3.5 OTHER CHARGES. Tenant agrees to pay and discharge, punctually as and
when the same shall become due and payable without penalty, all electricity,
gas, garbage
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collection, cable television, telephone, water, sewer, and other utilities costs
and all other charges, obligations or deposits assessed against the Premises
during the Term.
4. INSURANCE.
4.1 GENERAL INSURANCE REQUIREMENTS. All insurance provided for in this
Lease shall be maintained under valid and enforceable policies issued by
insurers of recognized responsibility, licensed and approved to do business in
the State of Illinois, having a general policyholders rating of not less than
"A-" and a financial rating of not less than "VIII" in the then most current
Best's Insurance Report. Any and all policies of insurance required under this
Lease shall name the Landlord as an additional insured and shall be on an
"occurrence" basis; provided, however, the proceeds of any business interruption
policy shall be payable to Tenant without relieving Tenant in any way of its
obligation to pay rent under this Lease. In addition, Landlord shall be shown as
the loss payable beneficiary under the casualty insurance policy maintained by
Tenant pursuant to Section 4.2. All policies of insurance required herein may be
in the form of "blanket" or "umbrella" type policies which shall name the
Landlord and Tenant as their interests may appear and allocate to the Premises
the full amount of insurance required hereunder. Original policies or
satisfactory certificates from the insurer evidencing the existence of all
policies of insurance required by this Lease and showing the interest of the
Landlord shall be filed with the Landlord prior to the commencement of the Term
and shall provide that the subject policy may not be canceled except upon not
less than ten (10) days prior written notice to Landlord. If Landlord is
provided with a certificate, upon Landlord's request Tenant shall provide
Landlord with a complete copy of the insurance policy evidenced by such
certificate within 30 days of the
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commencement of the Term. Originals of the renewal policies or certificates
therefor from the insurer evidencing the existence thereof shall be deposited
with Landlord upon renewal of the applicable policies. If Landlord is provided
with a certificate for a renewal policy, upon Landlord's request Tenant shall
deliver a copy of the complete renewal policy to Landlord within 30 days of the
expiration of the replaced policy. Any claims under any policies of insurance
described in this Lease shall be adjudicated by and at the expense of the Tenant
or of its insurance carrier, but shall be subject to joint control of Tenant and
Landlord. The provisions of this Section 4.1 also apply to any insurance
coverage required under the Development Addendum.
4.2 FIRE AND OTHER CASUALTY. Tenant shall keep the Premises insured against
loss or damage from all causes under standard "all risk" property insurance
coverage, without exclusion for fire, lightning, windstorm, explosion, smoke
damage, vehicle damage, sprinkler leakage, flood, vandalism, earthquake,
malicious mischief or any other risk as is normally covered under an extended
coverage endorsement, in the amounts that are not less than the full insurable
value of the Premises including all equipment and personal property (whether or
not Landlord Personal Property) used in the operation of the Premises, but in no
event less than Nine Million Nine Hundred Thousand Dollars ($9,900,000);
provided, however, that the amount of such insurance in respect of the required
flood and earthquake coverage may be limited, at Tenant's option, to Five
Million Dollars ($5,000,000). The term "FULL INSURABLE VALUE" as used in this
Lease shall mean the actual replacement value of the Premises (including all
improvements) and every portion thereof, including the cost of compliance with
changes in zoning and building codes and other laws and regulations,
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demolition and debris removal and increased cost of construction. In addition,
the casualty insurance required under this Section 4.2 will include an agreed
amount endorsement such that the insurance carrier has accepted the amount of
coverage and has agreed that there will be no co-insurance penalty.
4.3 PUBLIC LIABILITY. Tenant shall maintain comprehensive general public
liability insurance coverage (including products liability coverage) against
claims for bodily injury, death or property damage occurring on, in or about the
Premises and the adjoining sidewalks and passageways, such insurance to include
a broad form endorsement and to afford protection to Landlord and Tenant of not
less than One Million Dollars ($1,000,000) with respect to bodily injury or
death to any one person, not less than Five Million Dollars ($5,000,000) with
respect to any one accident, and not less than One Million Dollars ($1,000,000)
with respect to property damage; provided, that Landlord shall have the right at
any time hereafter to require such higher limits as may be reasonable and
customary for transactions and properties that are similar to the Premises and
that are located in the area of Chicago, Illinois.
4.4 PROFESSIONAL LIABILITY INSURANCE. Guarantor or Tenant shall maintain
insurance against liability imposed by law upon Guarantor and its Affiliates
(including Tenant) for damages on account of professional services rendered or
which should have been rendered by Guarantor and Tenant or any person for which
acts Guarantor or Tenant is legally liable on account of injury, sickness or
disease, including death at any time resulting therefrom, and including damages
allowed for loss of service, in a minimum amount of One Million Dollars
($1,000,000) for each claim and Five Million Dollars ($5,000,000) in the
aggregate.
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4.5 WORKERS COMPENSATION. Tenant shall comply with all legal requirements
regarding worker's compensation, including any requirement to maintain worker's
compensation insurance against claims for injuries sustained by Tenant's
employees in the course of their employment.
4.6 BOILER INSURANCE. Tenant shall maintain boiler and pressure vessel
insurance, including an endorsement for boiler business interruption insurance,
on any fixtures or equipment which are capable of bursting or exploding, in an
amount not less than Five Million Dollars ($5,000,000) for damage to property,
bodily injury or death resulting from such perils.
4.7 BUSINESS INTERRUPTION INSURANCE. Tenant shall maintain, at its expense,
business interruption and extra expense insurance insuring a period of not less
than six (6) months.
4.8 DEDUCTIBLE AMOUNTS. The policies of insurance which Tenant is required
to provide under this Lease will not have deductibles or self-insured retentions
in excess of One Hundred Thousand Dollars ($100,000); provided, however, the
worker's compensation coverage may have a deductible of up to Two Hundred Fifty
Thousand Dollars ($250,000).
5. USE, MAINTENANCE AND ALTERATION OF THE PREMISES.
5.1 TENANT'S MAINTENANCE OBLIGATIONS.
5.1.1 Tenant will keep and maintain the Premises in good
appearance, repair and condition and maintain proper housekeeping.
Tenant shall promptly make or cause to be made all repairs, interior
and exterior, structural and
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nonstructural, ordinary and extraordinary, foreseen and unforeseen,
necessary to keep the Premises in good and lawful order and condition
and in substantial compliance with all applicable requirements for the
licensing of the Retirement Care Facilities in the State of Illinois
and certification for participation in Medicare and Medicaid (or any
successor programs) as currently exist or as are obtained by Tenant at
a later date or as otherwise required under all applicable local,
state and federal laws.
5.1.2 As part of Tenant's obligations under this Section 5.1,
Tenant shall be responsible to maintain, repair and replace all
Landlord Personal Property and all Tenant Personal Property (as
defined in Section 7.1 below) in good condition, ordinary wear and
tear excepted, consistent with prudent industry practice as applicable
to the Retirement Care Facilities.
5.1.3 Without limiting Tenant's obligations to maintain the
Premises under this Lease, within thirty (30) days of the end of each
Lease Year starting with the end of the sixth (6th) Lease Year, Tenant
shall provide Landlord with evidence satisfactory to Landlord in the
reasonable exercise of Landlord's discretion that Tenant has in such
Lease Year and the two (2) immediately preceding Lease Years spent on
Repair Expenditures for the Premises an annual average amount of at
least Two Hundred Dollars ($200) per unit per year as such amount is
adjusted annually at the end of each Lease Year for increases in the
CPI from the date hereof). The term "REPAIR EXPENDITURES" is defined
to mean repairs or modifications to the Premises which have the effect
of
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maintaining the competitive position of the Premises in its
marketplace. Non-exclusive examples of Repair Expenditures are
replacement wallpaper, tiles, window coverings, lighting fixtures,
painting, landscaping, carpeting, architectural adornments, common
area amenities and the like. It is expressly understood that capital
improvements or repairs (such as but not limited to repairs or
replacements to the structural elements, equipment, fixtures,
appliances, parking area, or the roof or to the electrical, plumbing,
HVAC or other mechanical or structural systems in the Premises) shall
not be considered to be Repair Expenditures. If Tenant fails to make
at least the above amount of Repair Expenditures, Tenant shall
promptly on demand from Landlord (but in no event more than five days)
pay to Landlord the applicable shortfall in Repair Expenditures. Such
funds shall be the sole property of Landlord and Landlord may in its
sole discretion provide such funds to Tenant to correct the shortfall
in Repair Expenditures or may simply retain such funds as supplemental
rent hereunder.
5.2 REGULATORY COMPLIANCE.
5.2.1 Tenant and the Premises shall comply in all material
respects with all federal, state and local licensing and other laws
and regulations applicable to the Retirement Care Facilities as well
as with the certification requirements of Medicare and Medicaid (or
any successor program) as currently exist or as are obtained by Tenant
at a later date. Further, Tenant shall ensure that the Premises
continue to be licensed and operated as Retirement Care
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Facilities with a licensed and operating capacity as set forth in the
Recitals to this Lease, fully certified for participation in Medicare
and Medicaid (or any successor program) as currently exist or as are
obtained by Tenant at a later date throughout the Term and at the time
the Premises are returned to Landlord at the termination thereof, all
without any suspension, revocation, decertification, material penalty
or material limitation. Further, Tenant shall not commit any act or
omission that would in any way violate any certificate of occupancy
affecting the Premises.
5.2.2 During the Term, all inspection fees, costs and charges
associated with a change of any licensure or certification shall be
borne solely by Tenant. Tenant shall at its sole cost make any
additions or alterations to the Premises necessitated by, or imposed
in connection with, a change of ownership inspection survey for the
transfer of operation of the Premises from Tenant or Tenant's assignee
or subtenant to Landlord or Landlord's designee at the expiration or
earlier termination of the Term in accordance herewith.
5.2.3 Landlord acknowledges that the Premises are not now
certified to participate in Medicare or Medicaid. If Tenant elects to
participate in such programs (or any successor program) in the future,
Tenant shall comply in all material respects with the requirements to
participate in such programs. However, it shall not be a default under
this Lease if Tenant voluntarily for its own business reasons elects
to discontinue its participation in such programs so long as at the
time of such discontinuance there is no ongoing proceeding by the
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applicable regulatory authority to decertify Tenant and so long as
Tenant at the time of such discontinuance is not in material default
of any material requirement of any such program.
5.2.4 The permit for one hundred eighty (180) living units is
currently held by Holley Court Terrace, L.P., a Tennessee limited
partnership, which is an Affiliate of Tenant. Tenant represents and
warrants that applicable law does not require a transfer of such
permit to Tenant in order for Tenant to operate the Premises for its
intended use in compliance with all applicable regulations. However,
Tenant agrees to accomplish a transfer of the permit into its name
within one hundred eighty (180) days after the commencement of the
Term.
5.3 PERMITTED USE. Tenant shall continuously use and occupy the Premises
during the Term solely as Retirement Care Facilities licensed and operated as
set forth in the Recitals to this Lease.
5.4 TENANT REPURCHASE OBLIGATION. In the event of an Event of Default
arising from Tenant's failure to comply with Section 5.3 and during the pendency
thereof, or if an Event of Default occurs and is continuing because the license
of the Premises is revoked, suspended or materially limited for any of the uses
included in the definition of Retirement Care Facilities, then in addition to
Landlord's other rights and remedies under this Lease, Landlord shall have the
right to put the Premises to Tenant. If Landlord exercises such right, Tenant
shall purchase the Premises from Landlord for a cash price equal to the greater
of the Adjusted Fair Market Value of the Premises or Landlord's Original
Investment on the date of Landlord's notice of exercise. Such Adjusted Fair
Market Value shall be as agreed between
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Landlord and Tenant. However, failing such agreement within ten (10) days of
Landlord's notice of exercise under this Section, such Adjusted Fair Market
Value shall be determined by the appraisal process set forth in Exhibit "C"
attached hereto. Within ninety (90) days of Landlord's exercise of its put under
this Section 5.4, such purchase shall be consummated utilizing an escrow at a
national title company selected by Landlord. Such escrow shall be documented on
such title company's standard sale escrow instructions without representations
or warranties and without any due diligence or other contingencies in favor of
the buyer. Tenant shall pay all costs of such sale transaction. At the close of
such sale, Landlord shall deliver to Tenant title to the Premises subject only
to those title exceptions shown on Exhibit "D" attached hereto.
5.5 NO LIENS; PERMITTED CONTESTS. Tenant shall not cause or permit any
liens, levies or attachments to be placed or assessed against the Premises or
the operation thereof for any reason. However, Tenant shall be permitted in good
faith and at its expense to contest the existence, amount or validity of any
lien upon the Premises by appropriate proceedings sufficient to prevent the
collection or other realization of the lien or claim so contested, as well as
the sale, forfeiture or loss of any of the Premises or any rent to satisfy the
same. Tenant shall provide Landlord with security satisfactory to Landlord in
Landlord's reasonable judgment to assure the foregoing. Each contest permitted
by this Section 5.5 shall be promptly and diligently prosecuted to a final
conclusion by Tenant.
5.6 ALTERATIONS BY TENANT. Subject to Section 5.8, Tenant shall have the
right of altering, improving, replacing, modifying or expanding the facilities,
equipment or appliances in the Premises from time to time as it may determine is
desirable for the
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continuing and proper use and maintenance of the Premises under this Lease;
provided, however, that any alterations, improvements, replacements, expansions
or modifications to the Premises in excess of Six Hundred Thousand Dollars
($600,000) in any rolling twelve (12) month period shall require the prior
written consent of the Landlord; provided, further, that the aggregate cost of
tenant-funded improvements cannot exceed ten percent (10%) of Landlord's
Original Investment for the Premises without securing the prior written consent
of Landlord; provided, further, that the aggregate cost of tenant-funded
improvements cannot exceed ten percent (10%) of Landlord's Original Investment
without securing the prior written consent of the Landlord. Any amounts funded
by Tenant as necessitated by damage to the Premises by casualty or condemnation
shall not count towards the foregoing calculation. The cost of all alterations,
improvements, replacements, modifications, expansions or other purchases,
covered by this Section 5.6, whether undertaken as an on-going licensing,
Medicare or Medicaid (or any successor program) requirement (if applicable) or
other regulatory requirement or otherwise shall be borne solely and exclusively
by Tenant (unless funded by Landlord under Section 5.7) and shall immediately
become a part of the Premises and the property of the Landlord subject to the
terms and conditions of this Lease. All work done in connection therewith shall
be done in a good and workmanlike manner and in compliance with all existing
codes and regulations pertaining to the Premises and shall comply with the
requirements of insurance policies required under this Lease. In the event any
items of the Premises have become inadequate, obsolete or worn out or require
replacement (by direction of any regulatory body or otherwise), Tenant shall
remove such items and exchange
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or replace the same at Tenant's sole cost and the same shall become part of the
Premises and property of the Landlord.
5.7 CAPITAL IMPROVEMENTS FUNDED BY LANDLORD. In the event Tenant desires to
make a capital improvement or a related series of capital improvements to the
Premises and if Tenant desires that Landlord fund the same, Landlord shall, in
its discretion and without obligation, within thirty (30) days of Tenants'
written request therefor, consider Tenant's request to fund such capital
improvements. Each and every capital improvement funded by Landlord under this
Section shall immediately become a part of the Premises and shall belong to
Landlord subject to the terms and conditions of this Lease. If Landlord funds
any capital improvements, Landlord's Original Investment shall be increased for
all purposes under this Lease by the amount of the funds provided by Landlord
for capital improvements.
5.8 COMPLIANCE WITH IRS GUIDELINES. Any improvement or modification to the
Premises shall satisfy the requirements set forth in Sections 4(4).02 and .03 of
Revenue Procedure 75-21, 1975-1 C.B. 715, as modified by Revenue Procedure
79-48, 1979-2 C.B. 529. Landlord reserves the right to refuse to consent to any
improvement or modification to the Premises if, in its judgment, such
improvement or modification does not meet the foregoing requirements.
6. CONDITION AND TITLE OF PREMISES; RIGHT OF FIRST OFFER.
6.1 CONDITION AND TITLE OF PREMISES. Tenant acknowledges that it is
presently engaged in the operation of facilities in the State of Illinois
similar to the uses included in the definition of Retirement Care Facilities in
the Recitals to this Lease and has expertise in senior housing, independent
living and assisted living. Tenant has thoroughly
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investigated the Premises, has selected the Premises to its own specifications,
and has concluded that no improvements or modifications to the Premises are
required in order to operate the Premises for its intended use. Tenant accepts
the Premises for use as Retirement Care Facilities under this Lease on an "AS
IS" basis and will assume all responsibility and cost for the correction of any
observed or unobserved deficiencies or violations. In making its decision to
enter into this Lease, Tenant has not relied on any representations or
warranties, express or implied, of any kind from Landlord. Tenant has examined
the condition of title to the Premises prior to the execution and delivery of
this Lease and has found the same to be satisfactory.
6.2 RIGHT OF FIRST OFFER TO PURCHASE PREMISES.
6.2.1 Tenant shall have the right of first offer to purchase the
Premises upon the terms and conditions set forth in this Section 6.2;
provided, however, Tenant shall not have the right to exercise its rights
under this Section 6.2 if any Event of Default (as defined in Section 10
below) has occurred and is continuing as of any of the following dates: (i)
the date on which Landlord delivers an Offering Notice to Tenant pursuant
to Section 6.2.2(i), or (ii) the date of Tenant's delivery of an Exercise
Notice pursuant to Section 6.2.2(ii), or (iii) or at the closing date
established to consummate the purchase of the Premises pursuant to Section
6.2.2(iii). Additionally, if Landlord and NH Texas Properties Limited
Partnership have received a bona fide offer to purchase both the Premises
and the leased premises under the NH Agreement, Tenant acknowledges that
Landlord may include in the Offering Notice the condition that Tenant may
only purchase the Premises so long as NH Tenant concurrently purchases
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Premises that certain Premises as defined in the NH Agreement. If the
Offering Notice contains such a requirement, Tenant's rights under this
Section 6.2 are exercisable only so long as NH Tenant also exercises its
rights under Section 6.2 of the NH Agreement.
6.2.2 If during the Term Landlord receives a bona fide offer to
purchase the Premises, or any portion thereof (the "OFFERED PROPERTY"),
from any person or entity other than an Affiliate of Landlord (as such term
is defined in Section 10.1.3 below), Landlord and Tenant shall take the
following steps if Landlord has determined to accept such offer:
(i) Landlord shall give written notice to Tenant of its intention
to accept such offer, which notice shall set forth the price, terms
and conditions contained in the offer to purchase the Offered Property
which Landlord intends to accept ("OFFERING NOTICE");
(ii) Within fifteen (15) days after receipt of an Offering
Notice, Tenant shall either (A) deliver to Landlord written notice
that Tenant does not desire to purchase the Offered Property on the
terms set forth in the Offering Notice, or (B) deliver to Landlord
written notice of Tenant's desire to exercise its right to purchase
the Offered Property on the terms set forth in the Offering Notice
pursuant to this Section 6.2 ("EXERCISE NOTICE");
(iii) If Tenant delivers an Exercise Notice within such fifteen
(15) day period, Landlord as seller and Tenant as buyer shall
immediately open an escrow to consummate such purchase at a national
title company selected by Landlord in its reasonable discretion on the
following terms: (A) the form of
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such instructions to be then signed by Landlord and Tenant shall be
such title company's standard sale escrow instructions and,
notwithstanding anything set forth in the Offering Notice to the
contrary, shall not provide for any representations or warranties by
Landlord as seller or for any due diligence or other contingencies in
favor of Tenant as buyer, (B) the purchase price shall be payable in
cash by Tenant or on such other terms as are set forth in the Offering
Notice with escrow to close on or before the date set forth in the
Offering Notice, (C) transaction costs shall be paid as set forth in
the Offering Notice, (D) at close, Landlord shall deliver title to the
Offered Property subject only to those title exceptions shown on
Exhibit "D" attached hereto, (E) the sale escrow instructions shall
provide for an earnest money deposit in the amount set forth in the
Offering Notice and shall provide that such deposit may be retained by
Landlord as liquidated damages in the event of any breach by Tenant of
the terms of the escrow instructions (provided, however, such
liquidated damages shall relate only to Landlord's damages by reason
of a breach of the escrow instructions and shall in no way liquidate
or limit Landlord's damages by reason of a breach of this Lease), and
(F) the escrow instructions shall otherwise be in form and substance
reasonably satisfactory to Landlord. If Tenant fails to close the
escrow for any reason other than a breach by Landlord, then Landlord
shall have the right in its option (to be exercised in Landlord's sole
discretion) to either declare such breach to be a default under this
Lease (as to which the cure period shall, notwithstanding anything
else in this Lease, be ten (10) calendar
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days after notice by Landlord, after which an Event of Default shall
exist), or Landlord may elect to pursue all remedies available to
Landlord against Tenant under the escrow instructions or under
applicable law.
(iv) If within the fifteen (15) day period following Landlord's
delivery of an Offering Notice, Tenant either delivers to Landlord the
notice set forth in Section 6.2.2 (ii)(A) or fails to deliver either
of the notices set forth in Section 6.2.2(ii), then for a period of
nine (9) months following the expiration of such fifteen (15) day
period Landlord shall be free to sell the Offered Property on the
terms set forth in the Offering Notice or on any other revised terms
deemed appropriate by Landlord in its sole discretion; provided,
however, if such other revised terms include a price that is more than
ten percent (10%) below the price set forth in the Offering Notice,
then prior to completing any sale on such revised terms Landlord shall
notify Tenant of such revised offering terms. During the five (5)
business day period after receipt by Tenant of such notice, Tenant
shall have the right (to be exercised if at all by Tenant's execution
of escrow instructions and deposit of earnest money under Section
6.2.2 (iii) within such five (5) business day period) to require that
Landlord sell the Offered Property to Tenant on such revised offering
terms. If Tenant fails to timely exercise its right as required by the
preceding proviso, Landlord shall be free to sell the Offered Property
to a third party on the revised offering terms.
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(v) If at the end of the nine (9) month period described in
Section 6.2.1(iv), Landlord has not sold the Offered Property, then
Landlord shall again be required to comply with the provisions of this
Section 6.2 if Landlord desires to accept a third party offer to
purchase the Offered Property.
(vi) If an escrow is opened pursuant to Section 6.2.2(iii) and
such escrow fails to close by reason of Tenant's default, in addition
to all of the other rights and remedies of Landlord with respect to
such breach, Landlord shall thereafter be free to sell the Premises or
any portion thereof to any Person on any terms whatsoever without
being required to comply with this Section 6.2.
(vii) If Landlord has hypothecated its interest in the Premises,
this Section 6.2 shall not apply to any judicial or non-judicial sale
of the Premises in connection with any foreclosure action or
proceeding by the lender, or to any deed in lieu of such foreclosure.
7. LANDLORD AND TENANT PERSONAL PROPERTY.
7.1 TENANT PERSONAL PROPERTY. Tenant shall install, affix or assemble or
place on the Premises all items of furniture, fixtures, equipment and supplies
not included as Landlord Personal Property as Tenant reasonably considers to be
appropriate for Tenant's use of the Premises as contemplated by this Lease (the
"TENANT PERSONAL PROPERTY"). Tenant shall provide and maintain during the entire
Term all Tenant Personal Property as shall be necessary in order to operate the
Premises in compliance with all requirements set forth in this Lease. All Tenant
Personal Property shall be and shall remain the property of Tenant and may
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be removed by Tenant upon the expiration of the Term. However, if there is any
Event of Default which is continuing, Tenant will not remove the Tenant Personal
Property from the Premises and will on demand from Landlord, convey (subject to
any existing security interest thereon) the Tenant Personal Property to Landlord
by executing a bill of sale in a form reasonably required by Landlord. Upon any
such conveyance of Tenant Personal Property to Landlord, the amount owing by
Tenant to Landlord by reason of the applicable Event of Default shall be reduced
by the fair market value of such Tenant Personal Property, net of any associated
debt assumed by Landlord. Such fair market value shall be established by
agreement of the parties, but failing such agreement, within ten (10) days of
request by any party, such fair market value shall be established by the
appraisal process set forth in Exhibit C. In any event, Tenant will repair all
damage to the Premises caused by any removal of the Tenant Personal Property.
7.2 LANDLORD'S SECURITY INTEREST.
7.2.1 The parties intend that if Tenant defaults under this Lease,
Landlord will control the Tenant Personal Property and the Intangible
Property (as defined in Section 7.4 below) so that Landlord or its designee
can operate or re-let the Premises intact for use as Retirement Care
Facilities .
7.2.2 Therefore, to implement the intention of the parties, and for
the purpose of securing the payment and performance of Tenant's obligations
under this Lease, Tenant, as debtor, hereby grants to Landlord, as secured
party, a security interest in and an express contractual lien upon, all of
Tenant's right, title and interest in and to the Tenant Personal Property
and in and to the
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Intangible Property and any and all products and proceeds thereof, in which
Tenant now owns or hereafter acquires an interest or right, including any
leased Tenant Personal Property. This Lease constitutes a security
agreement covering all such Tenant Personal Property and the Intangible
Property. The security interest granted to Landlord in this Section 7.2.2.
is intended by Landlord and Tenant to be subordinate to any security
interest granted in connection with the financing or leasing of all or any
portion of the Tenant Personal Property so long as the lessor or financier
of such Tenant Personal Property agrees to give Landlord written notice of
any default by Tenant under the terms of such lease or financing
arrangement, to give Landlord a reasonable time following such notice to
cure any such default and to consent to Landlord's written assumption of
such lease or financing arrangement upon Landlord's curing of any defaults
thereunder. This security agreement and the security interest created
herein shall survive the termination of this Lease if such termination
results from the occurrence of an Event of Default.
7.2.3 Notwithstanding the foregoing, in no event will Landlord's
security interest extend to any of Tenant's motor vehicles, proprietary
software or systems or operating manuals.
7.3 FINANCING STATEMENTS. If required by Landlord at any time during the
Term, Tenant will execute and deliver to Landlord, in form reasonably
satisfactory to Landlord, additional security agreements, financing statements,
fixture filings and such other documents as Landlord may reasonably require to
perfect or continue the perfection of
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Landlord's security interest in the Tenant Personal Property and the Intangible
Property and any and all products and proceeds thereof now owned or hereafter
acquired by Tenant. Tenant shall pay all fees and costs that Landlord may incur
in filing such documents in public offices and in obtaining such record searches
as Landlord may reasonably require. In the event Tenant fails to execute any
financing statements or other documents for the perfection or continuation of
Landlord's security interest, Tenant hereby appoints Landlord as its true and
lawful attorney-in-fact to execute any such documents on its behalf, which power
of attorney shall be irrevocable and is deemed to be coupled with an interest.
7.4 INTANGIBLE PROPERTY. The term "INTANGIBLE PROPERTY" means documents,
chattel paper, contract rights, residency agreements, management agreements,
medical records, patient files, confidential patient materials, general
intangibles, choses in action, now owned or hereafter acquired by Tenant
(including any right to any refund of any taxes or other charges heretofore or
hereafter paid to any governmental authority) arising from or in connection with
Tenant's operation or use of the Premises; all licenses and permits now owned or
hereinafter acquired by Tenant, necessary or desirable for Tenant's use of the
Premises under this Lease, including without limitation, if applicable, any
certificate of need or other similar certificate; and the right to use any trade
or other name now or hereafter associated with the operation of the Premises by
Tenant, including, without limitation, the name "Holley Court Terrace," but
excluding any corporate names or logos used by Tenant or Guarantor. For purposes
of this Lease, the term "INTANGIBLE PROPERTY" shall not include accounts
receivable, negotiable instruments, rights to payment from third parties,
security
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deposits, utility deposits, proprietary software, training manuals, or general
corporate trademarks, service marks, logos, insignia, books or records of Seller
or Guarantor.
8. REPRESENTATIONS AND WARRANTIES. Landlord and Tenant do hereby each for
itself represent and warrant to each other as follows:
8.1 DUE AUTHORIZATION AND EXECUTION. This Lease and all agreements,
instruments and documents executed or to be executed in connection herewith by
either Landlord or Tenant were duly authorized and shall be binding upon the
party that executed and delivered the same.
8.2 DUE ORGANIZATION. Landlord and Tenant are duly organized, validly
existing and in good standing under the laws of the State of their respective
formations and are duly authorized and qualified to do all things required of
the applicable party under this Lease within the State of Illinois.
8.3 NO BREACH OF OTHER AGREEMENTS. Neither this Lease nor any agreement,
document or instrument executed or to be executed in connection herewith,
violates the terms of any other agreement to which either Landlord or Tenant is
a party where such violation would have a material adverse effect.
9. FINANCIAL, MANAGEMENT AND REGULATORY REPORTS.
9.1 MONTHLY FACILITY REPORTS. Within thirty (30) days after the end of each
calendar month during the Term, Tenant shall prepare and deliver monthly
financial reports to Landlord consisting of a balance sheet and income statement
prepared in accordance with generally accepted accounting principles
consistently applied ("GAAP"), and a summary of significant operating statistics
concerning the business conducted at the Premises. These
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reports will be accompanied by a statement signed by the President, Chief
Financial Officer, Principal Accounting Officer, Controller, Executive Vice
President for Corporate Development, Executive Vice President for Development
Services or other officer of Tenant as approved by Landlord in writing in its
sole discretion, affirming that said reports are true and correct in all
material respects and do not fail to disclose any material adverse information,
all after due inquiry ("OFFICER'S CERTIFICATE").
9.2 QUARTERLY FINANCIAL STATEMENTS. Within forty-five (45) days of the end
of each of the first three quarters of the fiscal year of Tenant, Tenant shall
deliver to Landlord the unaudited quarterly consolidated financial statements of
Tenant prepared in accordance with GAAP accompanied by an Officer's Certificate.
9.3 ANNUAL FINANCIAL STATEMENT. Within ninety (90) days of the fiscal year
end of Tenant, Tenant shall deliver to Landlord the annual consolidated
financial statement of Tenant prepared in accordance with GAAP and audited by a
certified public accounting firm reasonably acceptable to Landlord.
Notwithstanding any of the other terms of this Section 9.3, if Tenant becomes
subject to any reporting requirements of the Securities and Exchange Commission
(the "SEC") during the Term, Tenant shall concurrently deliver to Landlord such
reports as are delivered to the SEC pursuant to applicable security laws.
9.4 ACCOUNTING PRINCIPLES. All of the reports and statements required
hereby shall be prepared in accordance with GAAP.
9.5 REGULATORY REPORTS. In addition, Tenant shall within five (5) business
days of receipt thereof deliver to Landlord all federal, state and local
licensing and reimbursement certification surveys, inspection and other reports
received by Tenant as to the
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Premises or any portion thereof and the operation of business thereon,
including, without limitation, state department of health licensing surveys,
Medicare and Medicaid (and successor programs) certification surveys (if
applicable) and life safety code reports. Within five (5) business days of
receipt thereof, Tenant shall give Landlord written notice of any violation of
any federal, state or local licensing or reimbursement certification statute or
regulation including without limitation Medicare and Medicaid or successor
programs (if applicable to the Premises or any portion thereof), any suspension,
termination or restriction placed upon Tenant or the Premises or any portion
thereof, the operation of business thereon or the ability to admit residents, or
any violation of any other permit, approval or certification in connection with
the Premises or any portion thereof or its business, by any federal, state or
local authority including without limitation Medicare and Medicaid or successor
programs if applicable to the Premises or any portion thereof.
10. EVENTS OF DEFAULT AND LANDLORD'S REMEDIES.
10.1 EVENTS OF DEFAULT. The occurrence of any of the following shall
constitute an event of default on the part of Tenant hereunder ("EVENT OF
DEFAULT"):
10.1.1 The failure to pay within ten (10) calendar days of (i) the
date when due any Minimum Rent or Additional Rent, or (ii) the date when
delinquent of any taxes or assessments required of Tenant under this Lease;
10.1.2 A material breach by the seller thereunder of any of the
material representations, warranties or covenants in favor of Landlord as
set forth in the Purchase and Sale Agreement of even date herewith;
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10.1.3 Any Event of Default, as defined in Section 10 of the NH
Agreement, shall be an Event of Default under this Lease without any
further notice to Tenant and without the expiration of any cure period
except as set forth in the NH Agreement;
10.1.4 A material default by Tenant (or any Affiliate thereof)
("AFFILIATE" being defined to mean, with respect to any person or entity,
any other person or entity which controls, is controlled by or is under
common control with the first person or entity) under any other material
obligation other than this Lease owed by Tenant (or any Affiliate thereof)
to Landlord or any Affiliate of Landlord (including without limitation any
financing agreement or any other lease or the Letter of Credit Agreement of
even date herewith pursuant to which the letter of credit referenced in
Section 11 below is maintained), which default is not cured within any
applicable cure period provided in the documentation for such obligation.
It is expressly understood that Nationwide Health Properties, Inc. and NH
Texas Properties Limited Partnership are Affiliates of each other;
10.1.5 A material default by Tenant with respect to any material
obligation under any other lease or financing agreement with any other
party, which default is not cured within any applicable cure period
provided in the documentation for such obligation;
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10.1.6 Any material misstatement or omission of any material fact in
any written report, notice or communication from senior management of
Tenant to Landlord with respect to Tenant or the Premises or any portion
thereof;
10.1.7 Any change (voluntary or involuntary, by operation of law or
otherwise) in the person, persons, entity or entities which ultimately
exert effective control over the management of the affairs of Tenant as of
the date hereof except as permitted in Section 22.2 below;
10.1.8 An assignment by Tenant of all or substantially all of its
property for the benefit of creditors;
10.1.9 The appointment of a receiver, trustee, or liquidator for
Tenant, or any of the property of Tenant, if within three (3) business days
of such appointment Tenant does not inform Landlord in writing that Tenant
intends to cause such appointment to be discharged or Tenant does not
thereafter diligently prosecute such discharge to completion within sixty
(60) days after the date of such appointment;
10.1.10 The filing by Tenant of a voluntary petition under any federal
bankruptcy law or under the law of any state to be adjudicated as bankrupt
or for any arrangement or other debtor's relief, or in the alternative, if
any such petition is involuntarily filed against Tenant by any other party
and Tenant does not within three (3) business days of any such filing
inform Landlord in writing of the intent by Tenant to cause such petition
to be dismissed, if Tenant does not
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thereafter diligently prosecute such dismissal, or if such filing is not
dismissed within ninety (90) days after filing thereof;
10.1.11 The failure to make any monetary payment required by Tenant
under this Lease not covered in Section 10.1.1 or the failure to perform or
comply in any material respect with any other term or provision of this
Lease (other than those provisions set forth in Section 10.1.12 below) not
requiring the payment of money, including, without limitation, the failure
to comply with the provisions hereof pertaining to the use, operation and
maintenance of the Premises (or any portion thereof) or the breach of any
representation or warranty of Tenant in this Lease; provided, however, the
default described in this Section 10.1.11 is curable and shall be deemed
cured, if: (i) within five (5) business days of Tenant's receipt of a
notice of default from Landlord, Tenant gives Landlord notice of its intent
to cure such default; and (ii) Tenant cures such default within thirty (30)
days after such notice from Landlord, unless such default cannot with due
diligence be cured within a period of thirty (30) days because of the
nature of the default or delays beyond the control of Tenant, and cure
after such thirty (30) day period will not have a material and adverse
effect upon the Premises, in which case such default shall not constitute
an Event of Default if Tenant uses its best efforts to cure such default by
promptly commencing and diligently pursuing such cure to the completion
thereof, provided, however, no such default shall continue for more than
one hundred twenty (120) days from Tenant's receipt of a notice of default
from Landlord;
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10.1.12 There shall be no cure period in the event of the breach by
Tenant of (i) the obligation to provide replacement policies of insurance
as required in Section 4.1 above, (ii) the provisions of Section 20 below,
or (iii) the provisions of Section 22 below with respect to assignments and
other related matters; and
10.1.13 All notice and cure periods provided herein shall run
concurrently with any notice or cure periods provided by applicable law.
10.2 REMEDIES. Upon the occurrence of an Event of Default and during the
pendency thereof, Landlord may exercise all rights and remedies under this Lease
and the laws of the State of Illinois available to a lessor of real and personal
property in the event of a default by its lessee, and as to the Tenant Personal
Property and Intangible Property all remedies granted under the laws of such
State to a secured party under its Uniform Commercial Code. Without limiting the
foregoing, Landlord shall have the right to do any of the following:
10.2.1 If Landlord elects to terminate Tenant's right to possession
only, without terminating the Lease, Landlord may, at Landlord's option,
enter into the Premises, remove Tenant's sign and all other evidences of
tenancy, and take and hold possession thereof, without such entry and
possession terminating the Lease or releasing Tenant, in whole or in part,
from Tenant's obligation to pay rent hereunder for the full Term. In the
case of a default under Section 10.1.8 or 10.1.9, or in the event of a
bankruptcy proceeding as described in Section 10.1.10 below, Tenant shall
pay forthwith to Landlord, if Landlord so elects, a
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sum equal to the entire amount of rent then known or subject to calculation
for the remainder of the Term plus any other sums then due hereunder, and
all amounts not then due and payable shall be discounted to the
then-present value of such amount using a discount factor of five percent
(5.0%); and in any case, unless such amount is paid to Landlord, Tenant
shall remain liable for the Monthly Deficiency, as defined in this Section
10.2.1 below. Upon and after entry into possession without termination of
the Lease, Landlord shall, if and to the extent required by law, take
reasonable measures to mitigate the damages recoverable against Tenant by
attempting to relet the Premises or any part thereof for the account of
Tenant to any person, firm or corporation other than Tenant for such rent,
for such term and upon such conditions (which term may extend beyond the
lease term hereunder and which conditions include concessions and free rent
periods), as Landlord in Landlord's sole discretion shall determine;
provided, however, that Landlord shall not be required to accept any tenant
offered by Tenant or to observe any instructions given by Tenant about such
reletting. In any such case, Landlord may make repairs, alterations and
additions in or to the Premises and redecorate the same to the extent
deemed by Landlord necessary or desirable, and Tenant shall, upon demand,
pay all costs thereof, plus all of Landlord's other expenses of the
reletting, including all repossession costs, brokerage commissions, legal
expenses, attorney's fees and disbursements (collectively called
"LANDLORD'S MITIGATION EXPENSES"). If the consideration collected by
Landlord upon any
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such reletting for Tenant's account is not sufficient to pay monthly the
full amount of rent reserved in this Lease, including all adjustments and
escalations, together with the cost of repairs, alterations, additions,
redecorating and Landlord's Mitigation Expenses, Tenant shall pay to
Landlord the amount of each monthly deficiency ("MONTHLY DEFICIENCY") upon
demand. In addition, Tenant shall provide to any resident under a "life
care contract" as defined in the Life Care Facilities Act ("LIFE CARE
CONTRACT") a refund of all fees paid pursuant to such contract if permitted
by the terms of such contract. Tenant or any successor thereto shall be
solely responsible for all costs, expenses, liabilities and obligations
related to Life Care Contracts. Furthermore, the indemnity set forth in
Section 23 herein shall cover all liability, expense, loss, costs,
deficiency, fine, penalty or damage related to any Life Care Contract,
including any ramifications resulting from the Premises being permitted to
issue Life Care Contracts.
10.2.2 If Landlord elects to terminate this Lease and Tenant's right
to possession of the Premises, Landlord may recover all damages to which
Landlord is entitled under law, and in such event Landlord shall, if and to
the extent required by law, take reasonable measures to mitigate damages
recoverable against Tenant by attempting to relet the Premises or any part
thereof for the account of Tenant, for such rent, for such term and upon
such conditions (which term may extend beyond the lease term hereunder and
which conditions may include concessions and free rent periods), as
Landlord in
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Landlord's sole discretion shall determine; provided, however, that
Landlord shall not be required to accept any tenant offered by Tenant or to
observe any instructions given by Tenant about such reletting. Landlord's
damages shall specifically include (a) all of Landlord's expenses of
reletting (including repairs, alterations, improvements, additions,
decorations, and Landlord's Mitigation Expenses, plus (b) the amount of all
rent owing under this Lease for the balance of the Term discounted at the
rate of five percent (5%) per year, which amount shall be automatically
considered accelerated and immediately due and payable in full by Tenant to
Landlord upon Landlord's election to terminate this Lease. Landlord's right
to terminate this Lease may also be exercised at any time after an election
by Landlord under Section 10.2.1 to terminate Tenant's right to possession
on the Premises. In addition, Tenant shall provide to any resident under a
Life Care Contract a refund of all fees paid pursuant to such contract if
permitted by the terms of such contract. Tenant or any successor thereto
shall be solely responsible for all costs, expenses, liabilities and
obligations related to Life Care Contracts. Furthermore, the indemnity set
forth in Section 23 herein shall cover all liability, expense, loss, costs,
deficiency, fine, penalty or damage related to any Life Care Contract,
including any ramifications resulting from the Premises being permitted to
issue Life Care Contracts.
10.2.3 If any involuntary action or proceeding under any section or
sections of any bankruptcy act in any court or tribunal shall adjudge or
declare Tenant insolvent or unable to pay Tenant's debts, or if any
voluntary petition or
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similar proceeding under any section or sections of any bankruptcy act
shall be filed by Tenant in any court or tribunal to declare Tenant
insolvent or unable to pay Tenant's debts, and if such action or proceeding
shall not have been dismissed within ninety (90) days of the institution of
such proceeding, then and in any such event Landlord may, to the extent
permitted by law, if Landlord so elects but not otherwise, and with or
without notice of such election, and with or without entry or other action
by Landlord, forthwith terminate this Lease, and notwithstanding any other
provision of this Lease, Landlord shall forthwith upon such termination be
entitled to recover damages in any amount equal to the then present value
of rent for the remainder of the Term, less the then present value of the
fair rental value of the Premises for the remainder of the Term.
10.2.4 Tenant hereby grants to Landlord a first lien upon the interest
of Tenant under this Lease subject to any lien now or hereafter granted by
Tenant to secure financing for working capital or other general purposes in
favor of Tenant's principal bank or other institutional lenders.
10.2.5 Sell the Tenant Personal Property in a non-judicial foreclosure
sale.
10.2.6 For the purpose of calculating rent loss damages payable to
Landlord, Additional Rent for all periods after an Event of Default shall
be calculated based on a two and one half percent (2.5%) annual increase.
10.2.7 In the event that any remedy set forth in this Section 10.2
shall be declared unenforceable under any particular circumstances pursuant
to any bankruptcy,
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insolvency, or other applicable law, the unenforceability of such remedy
shall not affect any other remedy available to Landlord in the same or any
other circumstance.
10.3 RECEIVERSHIP. Tenant acknowledges that one of the rights and remedies
available to Landlord under applicable law is to secure a court-appointed
receiver to take possession of the Premises or any portion thereof, to collect
the rents, issues, profits and income of the Premises or any portion thereof,
and to manage the operation of the Premises or any portion thereof. Tenant
further acknowledges that the revocation, suspension or material limitation of
the certification of the Premises or any portion thereof for provider status
under Medicare or Medicaid (or successor programs) as currently exist or as are
obtained by Tenant at a later date and/or the revocation, suspension or material
limitation of the license of the Premises or any portion thereof as Retirement
Care Facilities for the number of beds and units shown in the Recitals to this
Lease under the laws of the State of Illinois will materially and irreparably
impair the value of Landlord's investment in the Premises. Therefore, in the
event of any such revocation, suspension or material limitation, and in addition
to any other right or remedy of Landlord under this Lease, Tenant hereby
consents to the appointment of such a receiver to enter upon and take possession
of the Premises or any portion thereof, to manage the operation of the Premises
or any portion thereof, to collect and disburse all rents, issues, profits and
income generated thereby and to preserve or replace to the extent possible the
licenses and provider certifications of the Premises required for the operation
of the Retirement Care Facilities or to otherwise substitute the licensee or
provider thereof. The receiver shall be entitled to a reasonable fee for its
services as a receiver. All such fees
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and other expenses of the receivership estate shall be added to the monthly rent
due to Landlord under this Lease. Tenant hereby irrevocably stipulates to the
appointment of a receiver under such circumstances and for such purposes and
agrees not to contest such appointment.
10.4 LATE CHARGES. Tenant acknowledges that the late payment of any Minimum
Rent or Additional Rent will cause Landlord to lose the use of such money and
incur costs and expenses not contemplated under this Lease, including, without
limitation, administrative and collection costs and processing and accounting
expenses, the exact amount of which is extremely difficult to ascertain.
Therefore, if any installment of Minimum Rent or Additional Rent is not paid
within five (5) calendar days after the due date for such rent payment, then
Tenant shall thereafter pay to Landlord on demand a late charge equal to five
percent (5%) of the amount of any installment of Minimum Rent or Additional Rent
not paid on the due date. Landlord and Tenant agree that this late charge
represents a reasonable estimate of such costs and expenses and is fair
compensation to Landlord for the loss suffered from such nonpayment by Tenant.
10.5 REMEDIES CUMULATIVE; NO WAIVER. No right or remedy herein conferred
upon or reserved to Landlord is intended to be exclusive of any other right or
remedy, and each and every right and remedy shall be cumulative and in addition
to any other right or remedy given hereunder or now or hereafter existing at law
or in equity. No failure of Landlord to insist at any time upon the strict
performance of any provision of this Lease or to exercise any option, right,
power or remedy contained in this Lease shall be construed as a waiver,
modification or relinquishment thereof as to any similar or different breach
(future or otherwise) by Tenant. A receipt by Landlord of any rent or other sum
due hereunder
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(including any late charge) with knowledge of the breach of any provision
contained in this Lease shall not be deemed a waiver of such breach, and no
waiver by Landlord of any provision of this Lease shall be deemed to have been
made unless expressed in a writing signed by Landlord.
10.6 PERFORMANCE OF TENANT'S OBLIGATIONS BY LANDLORD. If Tenant at any time
shall fail to make any payment or perform any act on its part required to be
made or performed under this Lease, then Landlord may, without waiving or
releasing Tenant from any obligations or default of Tenant hereunder, make any
such payment or perform any such act for the account and at the expense of
Tenant, and may enter upon the Premises for the purpose of taking all such
action thereon as may be reasonably necessary therefor. No such entry shall be
deemed an eviction of Tenant. All reasonable sums so paid by Landlord and all
necessary and incidental costs and expenses (including, without limitation,
reasonable attorneys' fees and expenses) incurred in connection with the
performance of any such act by Landlord, together with interest at the rate of
the Prime Rate as reported daily by the Wall Street Journal plus 5% (or if said
interest rate is violative of any applicable statute or law, then the maximum
interest rate allowable) from the date of the making of such payment or the
incurring of such costs and expenses by Landlord, shall be payable by Tenant to
Landlord on demand.
11. SECURITY DEPOSIT. Pursuant to a Letter of Credit Agreement of even date
herewith, Tenant has posted with the Landlord a letter of credit in the sum of
Two Hundred Fifty-Four Thousand Six Hundred Twenty-Nine and 63/100 Dollars
($254,629.63)
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representing a security deposit against the faithful performance of the terms
and conditions contained in this Lease.
12. DAMAGE BY FIRE OR OTHER CASUALTY.
12.1 RECONSTRUCTION USING INSURANCE. In the event of the damage or
destruction of the Premises, Tenant shall forthwith notify Landlord and
diligently repair or reconstruct the same to a like or better condition than
existed prior to such damage or destruction. Any net insurance proceeds payable
with respect to the casualty shall be used for the repair or reconstruction of
the Premises pursuant to reasonable disbursement controls in favor of Landlord.
If such proceeds are insufficient for such purposes, Tenant shall provide the
required additional funds.
12.2 SURPLUS PROCEEDS. If there remains any surplus of insurance proceeds
after the completion of the repair or reconstruction of the Premises, such
surplus shall belong to and be paid to Tenant.
12.3 NO RENT ABATEMENT. The rent payable under this Lease shall not abate
by reason of any damage or destruction of the Premises by reason of an insured
or uninsured casualty. Tenant hereby waives all rights under applicable law to
abate, reduce or offset rent by reason of such damage or destruction.
12.4 END OF TERM. Notwithstanding any other provision of this Section 12,
if the Premises are more than 50% destroyed (measured by square footage) by
casualty during the last six (6) months of the Initial Term or any Renewal Term,
Tenant may terminate this Lease by written notice to Landlord delivered within
thirty (30) days after the date of such casualty, in which event Landlord shall
retain all insurance proceeds.
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13. CONDEMNATION.
13.1 COMPLETE TAKING. If during the Term all or substantially all of the
Premises is taken or condemned by any competent public or quasi-public
authority, then Tenant may, at Tenant's election, made within thirty (30) days
of such taking by condemnation, terminate this Lease, and the current Minimum
Rent and Additional Rent shall be prorated as of the date of such termination.
The award payable upon such taking shall be allocated between Landlord and
Tenant as so allocated by the taking authority. In the absence of such
allocation by the taking authority, the award shall be allocated as agreed by
Landlord and Tenant. Failing such agreement within thirty (30) days after the
effective date of such taking, the award shall be allocated between Landlord and
Tenant pursuant to the appraisal procedure described on Exhibit "C" attached
hereto.
13.2 PARTIAL TAKING. In the event such condemnation proceeding or right of
eminent domain results in a taking of less than all or substantially all of the
Premises, the Minimum Rent and Additional Rental thereto shall be abated to the
same extent as the diminution in the fair market value of the Premises by reason
of the condemnation. Such diminution in the fair market value shall be as agreed
between Landlord and Tenant, but failing such agreement within thirty (30) days
of the effective date of the condemnation the same will be determined by
appraisal pursuant to Exhibit "C" attached hereto. Landlord shall be entitled to
receive and retain any and all awards for the partial taking and damage and
Tenant shall not be entitled to receive or retain any such award for any reason.
Landlord's Original Investment will be reduced for all purposes under this Lease
by reason of any award paid to Landlord under this Section 13.2.
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13.3 LEASE REMAINS IN EFFECT. Except as provided above, this Lease shall
not terminate and shall remain in full force and effect in the event of a taking
or condemnation of the Premises, or any portion thereof, and Tenant hereby
waives all rights under applicable law to abate, reduce or offset rent by reason
of such taking.
14. PROVISIONS ON TERMINATION OF TERM.
14.1 SURRENDER OF POSSESSION. Tenant shall, on or before the last day of
the Term, or upon earlier termination of this Lease (unless Tenant has purchased
the Premises pursuant to Section 6.2), surrender to Landlord the Premises
(including all resident charts and records along with appropriate resident
consents) in good condition and repair, excepting only (i) ordinary wear and
tear, (ii) any damage caused by condemnation pursuant to Section 13.1 above, or
(iii) any damage caused by fire or other casualty resulting in the termination
of the Lease per Section 12.4 above.
14.2 REMOVAL OF PERSONAL PROPERTY. If Tenant is not then in default
hereunder Tenant shall have the right in connection with the surrender of the
Premises to remove from the Premises all Tenant Personal Property but not the
Landlord Personal Property (including the Landlord Personal Property replaced by
Tenant or required by the State of Illinois or any other governmental entity to
operate the Premises for the purpose set forth in Section 5.3 above). Any such
removal shall be done in a workmanlike manner leaving the Premises in good and
presentable condition and appearance, including repair of any damage caused by
such removal. At the end of the Term or upon the earlier termination of this
Lease, (unless Tenant has purchased the Premises pursuant to Section 6.2),
Tenant shall return the Premises to Landlord with the Landlord Personal Property
(or replacements thereof)
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in the same condition and utility as was delivered to Tenant at the commencement
of the Term, normal wear and tear excepted.
14.3 TITLE TO PERSONAL PROPERTY NOT REMOVED. Title to any of Tenant
Personal Property which is not removed by Tenant upon the expiration of the Term
shall, at Landlord's election, vest in Landlord; provided, however, that
Landlord may remove and dispose at Tenant's expense of any or all of such Tenant
Personal Property which is not so removed by Tenant without obligation or
accounting to the Tenant.
14.4 MANAGEMENT OF PREMISES. Upon the expiration or earlier termination of
the Term (unless Tenant has purchased the Premises pursuant to Section 6.2),
Landlord or its designee, upon written notice to Tenant, may elect to assume the
responsibilities and obligations for the management and operation of the
Premises and Tenant agrees to cooperate fully with Landlord or its designee to
accomplish the transfer of such management and operation without interrupting
the operation of the Premises. Tenant shall not commit any act or be remiss in
the undertaking of any act that would jeopardize any licensure or certification
of the facility, and Tenant shall comply with all requests for an orderly
transfer of the Retirement Care Facilities license, Medicare and Medicaid (or
any successor program) certifications and possession at the time of any such
surrender. Upon the expiration or earlier termination of the Term, Tenant shall
promptly deliver copies of all of Tenant's books and records relating to the
Premises and its operations to Landlord.
14.5 CORRECTION OF DEFICIENCIES. Upon termination or cancellation of this
Lease, Tenant shall indemnify Landlord for any loss, damage, cost or expense
incurred by Landlord to correct all deficiencies of a physical nature identified
by the Illinois Department of
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Public Health and/or the United State Department of Health and Human Services,
or if Tenant chooses to become certified to participate in Medicare or Medicaid,
the Illinois Department of Public Aid and/or the United States Department of
Health and Human Services, Health Care Financing Administration, or any other
government agency or Medicare or Medicaid (or any successor program) providers
in the course of the change of ownership inspection and audit.
15. NOTICES AND DEMANDS. All notices and demands, certificates, requests,
consents, approvals, and other similar instruments under this Lease shall be in
writing and shall be deemed to have been properly given upon actual receipt
thereof or within two (2) business days of being placed in the United States
certified or registered mail, return receipt requested, postage prepaid (a) if
to Tenant, addressed to American Retirement Communities, L.P., 111 Westwood
Place, Suite 402, Brentwood, Tennessee 37027, Attn: President and General
Counsel Fax No. (615) 221-2269 with a copy to Bass, Berry & Sims PLC, 2700 First
American Center, 25th Floor, Nashville, Tennessee 37238, Attn: T. Andrew Smith,
Esq., Fax No. (615) 742-2766 or at such other address as Tenant from time to
time may have designated by written notice to Landlord, (b) if to Landlord,
addressed to Nationwide Health Properties, Inc., 4675 MacArthur Court, Suite
1170, Newport Beach, California 92660, Attn: President and General Counsel; Fax
No. (714) 251-9644 with a copy to O'Melveny & Myers LLP, 610 Newport Center
Drive, Suite 1700, Newport Beach, California 92660, Attn: Real Estate Department
Chairman, Fax No. (714) 669-6994, or at such address as Landlord may from time
to time have designated by written notice to Tenant. Refusal to accept delivery
shall be deemed delivery. If Tenant is not an individual, notice may be made to
any senior officer,
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general partner or principal thereof. Notice to any one co-Tenant shall be
deemed notice to all co-Tenants.
16. RIGHT OF ENTRY; EXAMINATION OF RECORDS. Landlord and its representative
may enter the Premises at any reasonable time after reasonable notice to Tenant
for the purpose of inspecting the Premises for any reason including, without
limitation, Tenant's default under this Lease, or to exhibit the Premises for
sale, lease or mortgage financing, or posting notices of default, or
non-responsibility under any mechanic's or materialman's lien law or to
otherwise inspect the Premises for compliance with the terms of this Lease. Any
such entry shall not unreasonably interfere with residents, resident care, or
any other of Tenant's operations. During normal business hours, Tenant will
permit Landlord and Landlord's representatives, inspectors and consultants to
examine all contracts, books and records relating to Tenant's operations at the
Premises, whether kept at the Premises or at some other location, including,
without limitation, Tenant's financial records.
17. LANDLORD MAY GRANT LIENS. Without the consent of Tenant, Landlord may,
subject to the terms and conditions set forth below in this Section 17, from
time to time, directly or indirectly, create or otherwise cause to exist any
lien, encumbrance or title retention agreement ("ENCUMBRANCE") upon the
Premises, or any portion thereof or interest therein (including this Lease),
whether to secure any borrowing or other means of financing or refinancing or
otherwise. Any such Encumbrance shall provide that it is subject to the rights
of Tenant under this Lease, and shall further provide that so long as no Event
of Default shall have occurred under this Lease, Tenant's occupancy hereunder,
including but without limitation Tenant's right of quiet enjoyment provided in
Section 18, shall not be disturbed in
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the event any such lienholder or any other person takes possession of the
Premises through foreclosure proceeding or otherwise. Upon the request of
Landlord, Tenant shall subordinate this Lease to the lien of a new Encumbrance
on the Premises, on the condition that the proposed lender agrees not to disturb
Tenant's rights under this Lease so long as Tenant is not in default hereunder.
18. QUIET ENJOYMENT. So long as there is no Event of Default which is
existing and continuing by Tenant, Landlord covenants and agrees that Tenant
shall peaceably and quietly have, hold and enjoy the Premises for the Term, free
of any claim or other action not caused or created by Tenant (excepting,
however, intrusion of Tenant's quiet enjoyment occasioned by condemnation or
destruction of the property as referred to in Section 12 and 13 hereof).
19. APPLICABLE LAW. This Lease shall be governed by and construed in
accordance with the internal laws of the State of Illinois without regard to the
conflict of laws rules of such State.
20. PRESERVATION OF GROSS REVENUES.
20.1 Tenant acknowledges that a fair return to Landlord on its investment
in the Premises is dependent, in part, on the concentration on the Premises
during the Term of the Retirement Care Facilities business of Tenant and its
Affiliates in the geographical area of the Premises. Tenant further acknowledges
that the diversion of resident care activities from the Premises to other
facilities owned or operated by Tenant or its Affiliates will have a material
adverse impact on the value and utility of the Premises.
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20.1.1 Therefore, Tenant agrees that during the Term, and for a period
of one (1) year thereafter (unless Tenant purchases the Premises), neither
Tenant nor any of its Affiliates shall, without the prior written consent
of Landlord, operate, own, participate in or otherwise receive revenues
from any other facility or institution providing services or similar goods
to those provided on or in connection with the Premises and the permitted
use (including each use included in the definition of Retirement Care
Facilities) thereof as contemplated under this Lease, within a three (3)
mile radius of the Premises.
20.1.2 In addition, Tenant hereby covenants and agrees that for a
period of one year following the expiration or earlier termination of this
Lease (unless Tenant purchases the Premises), neither Tenant nor any of its
Affiliates shall, without prior written consent of Landlord, hire, engage
or otherwise employ any management or supervisory personnel working on or
in connection with the Premises. Notwithstanding the foregoing, this
Section 20.1.2 does not apply to any corporate manager or multi-facility
employee to the extent such manager or employee is employed at other
facilities operated by Tenant or its Affiliates.
20.2 Notwithstanding the foregoing, Landlord acknowledges that Tenant
operates home health agencies out of the offices located on the Premises.
Section 20.1 does not apply to such home health activities operated by Tenant or
its Affiliates out of the Premises.
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20.3 Except as required for medically appropriate reasons, prior to and
after Lease termination, neither Tenant nor any of its Affiliates will recommend
or solicit the removal or transfer of any resident from the Premises to any
other facility.
21. HAZARDOUS MATERIALS.
21.1 HAZARDOUS MATERIAL COVENANTS. Tenant's use of the Premises shall
comply in all material respects with all Hazardous Materials Laws. In the event
any Environmental Activities occur or are suspected to have occurred in
violation in any material respect of any Hazardous Materials Laws or if Tenant
has received any Hazardous Materials Claim against the Premises, Tenant shall
promptly obtain all permits and approvals necessary to remedy any such actual or
suspected problem through the removal of Hazardous Materials or otherwise, and
upon Landlord's approval of the remediation plan, remedy any such problem to the
satisfaction of Landlord, in accordance with all Hazardous Materials Laws and
good business practices.
21.2 TENANT NOTICES TO LANDLORD. Tenant shall immediately advise Landlord
in writing of:
21.2.1 any Environmental Activities in violation of any Hazardous
Materials Laws,
21.2.2 any Hazardous Materials Claims against Tenant or the Premises,
21.2.3 any remedial action taken by Tenant in response to any
Hazardous Materials Claims or any Hazardous Materials on, under or about
the Premises in violation of any Hazardous Materials Laws,
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21.2.4 Tenant's discovery of any occurrence or condition on or in the
vicinity of the Premises that materially increase the risk that the
Premises will be exposed to Hazardous Materials,
21.2.5 all communications to or from Tenant, any governmental
authority or any other person relating to Hazardous Materials Laws or
Hazardous Materials Claims with respect to the Premises, including copies
thereof.
21.3 EXTENSION OF TERM. Notwithstanding any other provision of this Lease,
in the event any Hazardous Materials are discovered on, under or about the
Premises in violation of any Hazardous Materials Law, the Term shall be
automatically extended and this Lease shall remain in full force and effect
until the earlier to occur of the completion of all remedial action or
monitoring, as approved by Landlord in its reasonable discretion, in accordance
in all material respects with all Hazardous Materials Laws, or the date
specified in a written notice from Landlord to Tenant terminating this Lease
(which date may be subsequent to the date upon which the Term was to have
expired).
21.4 PARTICIPATION IN HAZARDOUS MATERIALS CLAIMS. Landlord shall have the
right, at Tenant's sole cost and expense and with counsel chosen by Landlord, to
join and participate in, as a party if it so elects, any legal proceedings or
actions initiated in connection with any Hazardous Materials Claims.
21.5 ENVIRONMENTAL ACTIVITIES shall mean the use, generation,
transportation, handling, discharge, production, treatment, storage, release or
disposal of any Hazardous Materials at any time to or from the Premises or
located on or present on or under the
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Premises. Nothing contained in the foregoing or elsewhere in this Section 21 is
intended to, nor shall it, limit the liability of Tenant, if any, to Landlord
with respect to any representation or warranty given by Tenant to Landlord with
respect to Hazardous Materials or environmental matters generally as set forth
in that certain Purchase and Sale Agreement between Holley Court Terrace, L.P.,
a Tennessee limited partnership, an Affiliate of Tenant, and Landlord.
21.6 HAZARDOUS MATERIALS shall mean (i) any petroleum products and/or
by-products (including any fraction thereof), flammable substances, explosives,
radioactive materials, hazardous or toxic wastes, substances or materials, known
carcinogens or any other materials, contaminants or pollutants which pose a
hazard to the Premises or to persons on or about the Premises or cause the
Premises to be in violation of any Hazardous Materials Laws; (ii) asbestos in
any form which is friable; (iii) urea formaldehyde in foam insulation or any
other form; (iv) transformers or other equipment which contain dielectric fluid
containing levels of polychlorinated biphenyls in excess of fifty (50) parts per
million or any other more restrictive standard then prevailing; (v) medical
wastes and biohazards; (vi) radon gas; and (vii) any other chemical, material or
substance, exposure to which is prohibited, limited or regulated by any
governmental authority or may or could pose a hazard to the health and safety of
the occupants of the Premises or the owners and/or occupants of property
adjacent to or surrounding the Premises.
21.7 HAZARDOUS MATERIALS CLAIMS shall mean any and all enforcement,
clean-up, removal or other governmental or regulatory actions or orders
threatened, instituted or completed pursuant to any Hazardous Material Laws,
together with all claims made or
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threatened by any third party against the Premises, Landlord or Tenant relating
to damage, contribution, cost recovery compensation, loss or injury resulting
from any Hazardous Materials.
21.8 HAZARDOUS MATERIALS LAWS shall mean any and all federal, state, and
municipal laws, ordinances, regulations, rules, orders, guidelines or policies
relating to the environment, health and safety, Environmental Activities,
Hazardous Materials, air and water quality, waste, including medical and
biohazardous waste, and any other environmental matters, as they exist now or as
they are hereinafter enacted, promulgated, or amended. Hazardous Materials Laws
include, but are not limited to, the Comprehensive Environmental Response,
Compensation, and Liability Act, the Resource Conservation and Recovery Act, the
Occupational Safety and Health Act, the Illinois Environmental Protection Act,
and the Illinois Responsible Property Transfer Act.
22. ASSIGNMENT AND SUBLETTING. Tenant shall not voluntarily or
involuntarily assign or hypothecate this Lease or any interest herein or sublet
the Premises or any part thereof. For the purposes of this Lease, a management
or similar agreement shall be considered to be an assignment of this Lease by
Tenant. Any of the foregoing acts shall be void but shall, at the option of
Landlord in its sole discretion, constitute an Event of Default giving rise to
Landlord's right, among other things, to terminate this Lease. Without limiting
the foregoing, this Lease shall not, nor shall any interest of Tenant herein, be
assigned or encumbered by operation of law. Notwithstanding the foregoing,
Tenant may assign this Lease or sublet the Premises or any portion thereof to a
Successor (as such term is defined below), to a wholly-owned subsidiary of
Tenant provided that such Successor or subsidiary
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fully assumes the obligations of Tenant under this Lease, Tenant remains fully
liable under this Lease the use of the Premises remains unchanged, and no such
assignment or sublease shall be valid and no such subsidiary or Successor shall
take possession of the Premises until an executed counterpart of such assignment
or sublease has been delivered to Landlord. Anything contained in this Lease to
the contrary notwithstanding, Tenant shall not sublet the Premises on any basis
such that the rental to be paid by the sublessee thereunder would be based, in
whole or in part, on either the income or profits derived by the business
activities of the sublessee, or any other formula, such that any portion of the
sublease rental received by Landlord would fail to qualify as "rents from real
property" within the meaning of Section 856(d) of the U.S. Internal Revenue
Code, or any similar or successor provision thereto.
22.1 For the purpose of this Lease, the transfer, assignment, sale,
hypothecation or other disposition of any partnership, stock or other
ownership interest in Tenant which results in a change in the Person (as
hereinafter defined) which ultimately exerts effective Control (as
hereinafter defined) over the management of the affairs of Tenant as of the
date hereof, shall be deemed to be an assignment of the Lease. For purposes
herein, "CONTROL" shall mean, as applied to any individual, partnership,
association, corporation or other entity (collectively, "PERSON"), the
possession, directly or indirectly, of the power to direct the management
and policies of that Person, whether through ownership, voting control, by
contract or otherwise.
22.2 Notwithstanding anything to the contrary contained in Section
22.1, none of the following shall be deemed to be an assignment of the
Lease (i)
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an initial public offering ("IPO") of Tenant or any Successor thereto, or
(ii) any secondary public offering(s) of Tenant or any Successor thereto,
or (iii) subsequent to an IPO by Tenant or any Successor thereto, and so
long as Tenant or its Successor is a publicly-traded entity on a national
exchange, a change in the Person or Persons exercising Control of Tenant or
its Successor, or (iv) a lease of a unit or bed to a resident of the
Premises in the ordinary course of Tenant's business.
22.3 As used herein, a "SUCCESSOR" is any entity which succeeds to
materially all of the assets, operations and business of Tenant by merger
or reorganization and which is Controlled by the same Person or Persons as
Control Tenant prior to such merger or reorganization.
23. INDEMNIFICATION. To the fullest extent permitted by law, Tenant agrees
to protect, indemnify, defend and save harmless Landlord, its directors,
officers, shareholders, agents and employees from and against any and all
foreseeable or unforeseeable liability, expense loss, costs, deficiency, fine,
penalty, or damage (including without limitation punitive or consequential
damages) of any kind or nature, including reasonable attorneys' fees, from any
suits, claims or demands, on account of any matter or thing, action or failure
to act arising out of or in connection with this Lease (including, without
limitation, the breach by Tenant of any of its obligations hereunder), the
Premises, or the operations of Tenant on the Premises, including without
limitation all Environmental Activities on the Premises, all Hazardous Materials
Claims or any violation by Tenant of a Hazardous Materials Law with respect to
the Premises. Upon receiving knowledge of any suit, claim or demand asserted by
a third party
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that Landlord believes is covered by this indemnity, Landlord shall give Tenant
notice of the matter. Tenant shall defend Landlord against such matter at
Tenant's sole cost and expense with legal counsel satisfactory to Landlord.
Landlord may elect to defend the matter with its own counsel at Tenant's
expense.
24. HOLDING OVER. If Tenant shall for any reason remain in possession of
the Premises after the expiration or earlier termination of this Lease, such
possession shall be a month-to-month tenancy during which time Tenant shall pay
as rental each month, 1 1/2 times the aggregate of the monthly Minimum Rent
payable with respect to the last Lease Year plus Additional Rent allocable to
the month, all additional charges accruing during the month and all other sums,
if any, payable by Tenant pursuant to the provisions of this Lease with respect
to the Premises. Nothing contained herein shall constitute the consent, express
or implied, of Landlord to the holding over of Tenant after the expiration or
earlier termination of this Lease, nor shall anything contained herein be deemed
to limit Landlord's remedies pursuant to this Lease or otherwise available to
Landlord at law or in equity.
25. ESTOPPEL CERTIFICATES. Tenant shall, at any time upon not less than
five (5) days prior written request by Landlord, execute, acknowledge and
deliver to Landlord or its designee a statement in writing, executed by an
officer or general partner of Tenant, certifying that this Lease is unmodified
and in full force and effect (or, if there have been any modifications, that
this Lease is in full force and effect as modified, and setting forth such
modifications), the dates to which Minimum Rent, Additional Rent and additional
charges hereunder have been paid, certifying that no default by either Landlord
or Tenant exists
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hereunder or specifying each such default and as to other matters as Landlord
may reasonably request.
26. CONVEYANCE BY LANDLORD. If Landlord or any successor owner of the
Premises shall convey the Premises in accordance with the terms hereof, Landlord
or such successor owner shall thereupon be released from all future liabilities
and obligations of Landlord under this Lease arising or accruing from and after
the date of such conveyance or other transfer as to the Premises and all such
future liabilities and obligations shall thereupon be binding upon the new
owner.
27. WAIVER OF JURY TRIAL. Landlord and Tenant hereby waive any rights to
trial by jury in any action, proceedings or counterclaim brought by either of
the parties against the other in connection with any matter whatsoever arising
out of or in any way connected with this Lease, including, without limitation,
the relationship of Landlord and Tenant, Tenant's use and occupancy of the
Premises, or any claim of injury or damage relating to the foregoing or the
enforcement of any remedy hereunder.
28. ATTORNEYS' FEES. If Landlord or Tenant brings any action to interpret
or enforce this Lease, or for damages for any alleged breach hereof, the
prevailing party in any such action shall be entitled to reasonable attorneys'
fees and costs as awarded by the court in addition to all other recovery,
damages and costs.
29. SEVERABILITY. In the event any part or provision of the Lease shall be
determined to be invalid or enforceable, the remaining portion of this Lease
shall nevertheless continue in full force and effect.
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30. COUNTERPARTS. This Lease may be executed in any number of counterparts,
each of which shall be deemed an original, but all of which shall constitute one
and the same agreement.
31. BINDING EFFECT. Subject to the provisions of Section 22 above, this
Lease shall be binding upon and inure to the benefit of Landlord and Tenant and
their respective heirs, personal representatives, successors in interest and
assigns.
32. WAIVER AND SUBROGATION. Landlord and Tenant hereby waive to each other
all rights of subrogation which any insurance carrier, or either of them, may
have as to the Landlord or Tenant by reason of any provision in any policy of
insurance issued to Landlord or Tenant, provided such waiver does not thereby
invalidate the policy of insurance.
33. MEMORANDUM OF LEASE. Landlord and Tenant shall, promptly upon the
request of either, enter into a short form memorandum of the Lease, in form
suitable for recording under the laws of the State of Illinois in which
reference to this Lease shall be made. The party requesting such recordation
shall pay all costs and expenses of preparing and recording such memorandum of
this Lease.
34. INCORPORATION OF RECITALS AND ATTACHMENTS. The recitals and exhibits,
schedules, addenda and other attachments to this Lease are hereby incorporated
into this Lease and made a part hereof.
35. TITLES AND HEADINGS. The titles and headings of sections of this Lease
are intended for convenience only and shall not in any way affect the meaning or
construction of any provision of this Lease.
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36. NATURE OF RELATIONSHIP; USURY SAVINGS CLAUSE. The parties intend that
their relationship shall be that of lessor and lessee only. Nothing contained in
this Lease shall be deemed or construed to constitute an extension of credit by
Landlord to Tenant, nor shall this Lease be deemed to be a partnership or
venture agreement between Landlord and Tenant. Notwithstanding the foregoing, in
the event any payment made to Landlord hereunder is deemed to violate any
applicable laws regarding usury, the portion of any payment deemed to be
usurious shall be held by Landlord to pay the future obligations of Tenant as
such obligations arise and, in the event Tenant discharges and performs all
obligations hereunder, such funds will be reimbursed to Tenant upon the
expiration of the Term. No interest shall be paid on any such funds held by
Landlord.
37. JOINT AND SEVERAL. If more than one person or entity is the Tenant
hereunder, the liability and obligations of such persons or entities under this
Lease shall be joint and several.
38. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. All of the
obligations, representations, warranties and covenants of Tenant under this
Lease shall survive the expiration or earlier termination of the Term.
39. INTERPRETATION. Both Landlord and Tenant have been represented by
counsel and this Lease has been freely and fairly negotiated. Consequently, all
provisions of this Lease shall be interpreted according to their fair meaning
and shall not be strictly construed against any party.
[SIGNATURES ON NEXT PAGE]
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Executed as of the date indicated above.
TENANT:
AMERICAN RETIREMENT
COMMUNITIES, L.P.,
a Tennessee limited partnership
By: AMERICAN RETIREMENT
COMMUNITIES, LLC,
a Tennessee limited
liability company
By: ___________________________
H. Todd Kaestner,
Executive Vice President - Corporate
Development
LANDLORD:
NATIONWIDE HEALTH PROPERTIES, INC.,
a Maryland corporation
By: ___________________________
T. Andrew Stokes,
Senior Vice President, Development
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EXHIBIT "A"
Legal Description of Premises
THE LAND REFERRED TO IN THIS POLICY IS IN THE STATE OF ILLINOIS, COUNTY
OF COOK AND IS DESCRIBED AS FOLLOWS:
THAT PART OF THE FOLLOWING DESCRIBED PARCELS (ALL TAKEN AS ONE TRACT)
EXCEPT THE WEST 299.00 FEET OF SAID TRACT:
(A) THE NORTH 92 FEET OF LOTS 7 AND 8 LYING NORTH OF THE NORTH LINE OF
HOLLEY COURT (FORMERLY CEDAR STREET) IN SKINNER'S SUBDIVISION OF 30
ACRES IN THE SOUTHWEST CORNER OF THE NORTHWEST 1/4 OF SECTION 7,
TOWNSHIP 39 NORTH, RANGE 13 EAST OF THE THIRD PRINCIPAL MERIDIAN, IN
COOK COUNTY, ILLINOIS;
(B) THE NORTH 92 FEET OF LOTS 1 AND 2 IN HENRY MOHLE'S SUBDIVISION OF
LOT 9 IN SAMUEL P. SKINNER'S SUBDIVISION OF 30 ACRES IN THE SOUTHWEST
CORNER OF THE NORTHWEST 1/4 OF SECTION 7, TOWNSHIP 39 NORTH, RANGE 13
EAST OF THE THIRD PRINCIPAL MERIDIAN, IN COOK COUNTY, ILLINOIS;
(C) THE NORTH 98 FEET OF LOTS 1 THROUGH 4 AND THE NORTH 92 FEET OF LOTS
5 THROUGH 7 IN HOLLEY'S SUBDIVISION OF LOTS 2 TO 12 IN BLOCK 2 OF
WHAPLE'S SUBDIVISION OF PART OF THE SOUTHWEST 1/4 OF THE NORTHWEST 1/4
OF SECTION 7, TOWNSHIP 39 NORTH, RANGE 13 EAST OF THE THIRD PRINCIPAL
MERIDIAN, IN COOK COUNTY, ILLINOIS;
(D) LOTS 1 THROUGH 4 IN BOLLE'S SUBDIVISION OF LOTS 7 AND 8 IN BLOCK 8
IN KETTLESTRING'S ADDITION TO HARLEM, A SUBDIVISION OF PART OF THE
NORTHWEST 1/4 OF SECTION 7, TOWNSHIP 39 NORTH, RANGE 13 EAST OF THE
THIRD PRINCIPAL MERIDIAN, IN COOK COUNTY, ILLINOIS;
(E) LOT 6 IN BLOCK 8 IN KETTLESTRING'S ADDITION TO HARLEM, BEING A
SUBDIVISION OF PART OF THE NORTHWEST 1/4 OF SECTION 7, TOWNSHIP 39
NORTH, RANGE 13 EAST OF THE THIRD PRINCIPAL MERIDIAN, IN COOK COUNTY,
ILLINOIS;
(F) ALL OF THE VACATED EAST AND WEST ALLEY (VACATED BY ORDINANCE
RECORDED AUGUST 17, 1953 AS DOCUMENT 15696610) LYING NORTH OF AND
ADJOINING LOTS 1, 2, AND 3 AFORESAID, SOUTH OF AND ADJOINING LOTS 1, 2,
3 AND PART OF LOT 4, AFORESAID EAST OF THE
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WEST LINE OF LOT 1, PRODUCED NORTH, AND WEST OF THE EAST LINE OF LOT
3, PRODUCED NORTH, SAID ALLEY BEING THAT PART OF THE SOUTH 12 FEET OF
LOT 7 IN BLOCK 8 IN KETTLESTRING'S ADDITION TO HARLEM, AFORESAID LYING
WEST OF THE EAST LINE OF LOT 3, PRODUCED NORTH, ALL IN COOK COUNTY,
ILLINOIS;
(G) ALL OF THE EAST-WEST 12 FOOT PUBLIC ALLEY (VACATED BY ORDINANCE
RECORDED AUGUST 6, 1964 AS DOCUMENT 19207080) LYING SOUTH OF AND
ADJOINING LOT 4 IN BOLLE'S SUBDIVISION OF LOTS 7 AND 8 OF BLOCK 8 IN
KETTLESTRING'S ADDITION TO HARLEM, AND NORTH OF AND ADJOINING LOT 4 IN
HOLLEY'S SUBDIVISION AFORESAID IN SECTION 7, TOWNSHIP 39 NORTH, RANGE
13 EAST OF THE THIRD PRINCIPAL MERIDIAN, IN COOK COUNTY, ILLINOIS.
(H) ALL OF HARLEM COURT (VACATED BY ORDINANCE RECORDED AUGUST 6, 1964
AS DOCUMENT 19207080) LYING WEST OF AND ADJACENT TO LOT 6 IN BLOCK 8 IN
KETTLESTRING'S ADDITION TO HARLEM IN SECTION 7, TOWNSHIP 39 NORTH,
RANGE 13 EAST OF THE THIRD PRINCIPAL MERIDIAN, IN COOK COUNTY,
ILLINOIS.
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EXHIBIT "B"
Landlord Personal Property
All furniture, furnishings, equipment, tools, machinery, fixtures,
appliances and all other intangible and tangible personal property, other than
the Fixtures (as defined in the Lease), conveyed to Landlord pursuant to that
certain Purchase and Sale Agreement between Holley Court Terrace, L.P., a
Tennessee limited partnership, an Affiliate of Tenant, and Landlord.
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EXHIBIT "C"
Appraisal Process
If Landlord and Tenant are unable to agree upon the Adjusted Fair Market
Value of the Premises within any relevant period provided in this Lease, each
shall within ten (10) days after written demand by the other select one MAI
Appraiser to participate in the determination of Adjusted Fair Market Value. For
all purposes under this Lease, the Adjusted Fair Market Value of the Premises
shall be based on the Adjusted Fair Market Value of the Premises unencumbered by
this Lease. Within ten (10) days of such selection, the MAI Appraisers so
selected by Landlord and Tenant shall select a third MAI Appraiser. The three
(3) selected MAI Appraisers shall each determine the Adjusted Fair Market Value
of the Premises within thirty (30) days of the selection of the third appraiser.
To the extent consistent with sound appraisal practices as then existing at the
time of any such appraisal, and if requested by Landlord, such appraisal, shall
be made on a basis consistent with the basis on which the Premises was appraised
at the time of its acquisition by Landlord. Each of Tenant and Landlord shall
pay the fees and expenses of any MAI Appraiser which such party appoints
pursuant to this Exhibit plus 50% of the cost of the third appraiser.
In the event either Landlord or Tenant fails to select a MAI Appraiser
within the time period set forth in the foregoing paragraph, the MAI Appraiser
selected by the other party shall alone determine the Adjusted Fair Market Value
of the Premises in accordance with the provisions of this Exhibit and the
Adjusted Fair Market Value so determined shall be binding upon Landlord and
Tenant.
In the event the MAI Appraisers selected by Landlord and Tenant are unable
to agree upon a third MAI Appraiser within the time period set forth in the
first paragraph of this Exhibit, either Landlord or Tenant shall have the right
to apply at their mutual expense to the presiding judge of the court of original
trial jurisdiction in the county in which the Premises is located to name the
third MAI Appraiser.
Within five (5) days after completion of the third MAI Appraiser's
appraisal, all three MAI Appraisers shall meet and a majority of the MAI
Appraisers shall attempt to determine the Adjusted Fair Market Value of the
Premises. If a majority are unable to determine the Adjusted Fair Market Value
at such meeting, the three appraisals shall be added together and their total
divided by three. The resulting quotient shall be the Adjusted Fair Market Value
of the Premises. If, however, either or both of the low appraisal or the high
appraisal are more than ten percent (10%) lower or higher than the middle
appraisal, any such lower or higher appraisal shall be disregarded. If only one
appraisal is disregarded, the remaining two appraisals shall be added together
and their total divided by two, and the resulting quotient shall be such
Adjusted Fair Market Value. If both the lower appraisal and higher appraisal are
disregarded as provided herein, the middle appraisal shall be such Adjusted Fair
Market Value. In any event, the result of the foregoing appraisal process shall
be final and binding.
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Landlord, Tenant and any Guarantor will exercise their respective best
efforts to expedite the appraisal process and will cooperate fully and with all
deliberate speed with each other and with all appraisers in order to allow the
determination of Adjusted Fair Market Value to be finally completed.
Notwithstanding anything else in this Exhibit, if any appraiser appointed
hereunder fails to complete his or her report within 60 days of his or her
appointment, the Adjusted Fair Market Value of the Premises will be determined
by reference to the other report or reports completed within such period.
"MAI APPRAISER" shall mean an appraiser licensed or otherwise qualified to
do business in the State and who has substantial experience in performing
appraisals of facilities similar to the Premises and is certified as a member of
the American Institute of Real Estate Appraisers or certified as a SRPA by the
Society of Real Estate Appraisers, or, if such organizations no longer exist or
certify appraisers, such successor organization or such other organization as is
approved by Landlord.
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EXHIBIT "D"
Permitted Exceptions
1. The standard printed exceptions, conditions and exclusions from coverage
contained in the standard coverage owner's title policy then prevailing in use
at the title company which consummates the sale transaction.
2. Any matters which an accurate survey of the Premises may show.
3. Exception Nos. 7 (modified to provide that no taxes are due and
payable), 10 and 12 through 15 on the preliminary title report issued by
Fidelity National Title Insurance Company dated November 7, 1996 under Order
Number 96-11331.
4. Such other matters burdening the Premises which were created with the
consent or knowledge of Tenant or arising out of Tenant's acts or omissions.
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EXHIBIT "E"
Initial Term Minimum Rent
[attached]
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